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In the latest crypto news, India’s Financial Intelligence Unit (FIU) has levied a significant fine of 188.2 million rupees ($2.25 million) on the cryptocurrency exchange Binance. The penalty arises from the exchange’s failure to adhere to the nation’s Anti-Money
Laundering (AML) regulations, a critical component of the Prevention of Money Laundering Act (PMLA) of 2002. The decision, announced on June 19, 2024, underscores the growing scrutiny and regulatory pressure on crypto platforms operating within India.
What Is The Case About?
Binance, operating as a Virtual Digital Asset Service Provider, is classified as a reporting entity (RE) under Section 2 (as) (vi) of the PMLA. This classification mandates the maintenance and reporting of transaction records and the implementation of robust AML measures.
However, the FIU’s investigation revealed that BINANCE failed to comply with these obligations while providing services to Indian clients. The investigation into Binance’s operations is not a sudden development. Indian authorities have been vigilant about the activities of offshore cryptocurrency exchanges, which they accused of “operating illegally” in January 2024.
Show-cause notices were issued to Binance and several other exchanges, leading to a ban on their operations in India. Despite this, in May 2024, Binance and KUCOIN became the first offshore crypto entities to gain conditional approval from the FIU, contingent on paying a penalty after a hearing.
Violations and Regulatory Action
The FIU’s recent announcement confirmed that the charges against Binance were substantiated based on available records and submissions from the Binance director.
The investigation identified multiple violations by Binance, including failing to maintain and report transaction records, not providing required information to authorities, and not preserving records as mandated by the PMLA.
These infractions indicate significant lapses in compliance with India’s AML regulations, which are designed to prevent financial crimes such as money laundering and terrorism financing.
The FIU’s enforcement action highlights the importance of stringent adherence to AML norms, particularly for entities dealing with virtual digital assets. This move by the FIU is part of a broader regulatory effort to ensure that cryptocurrency exchanges operate within the legal framework established to protect the financial system.
Global Regulatory Scrutiny
Binance’s regulatory challenges are not confined to India. In May 2024, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposed a $4.4 million penalty on Binance. The Canadian regulator cited the exchange’s failure to register as a foreign money services business and to report large transactions in digital assets, specifically those exceeding $10,000.
Binance has appealed against these allegations, arguing that it was compliant with AML and Countering the Financing of Terrorism regulations. Moreover, in February 2024, Nigerian authorities detained two Binance executives over allegations of tax evasion and money laundering.
These incidents highlight the growing global scrutiny that Binance faces from regulatory bodies in multiple jurisdictions. The exchange’s repeated run-ins with regulators underscore the challenges that global cryptocurrency platforms encounter in navigating complex and varied regulatory landscapes.
