According to the latest cryptocurrency news, India’s Financial Intelligence Unit (FIU) has imposed a hefty fine of 188.2 million rupees ($2.25 million) on cryptocurrency exchange Binance. The penalty arises due to the exchange’s failure to comply with the country’s anti-currency policy.
AML (laundering) regulations are an important component of the Prevention of Money Laundering Act, 2002 (PMLA). The decision, announced on June 19, 2024, highlights the growing scrutiny and regulatory pressure on cryptocurrency platforms operating within India.
What is the case about?
Binance, which operates 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 strong AML measures.
However, the FIU’s investigation found that Binance failed to comply with these obligations while providing services to Indian customers. The investigation into Binance’s operations is not a sudden development. Indian authorities have been wary of the activities of offshore cryptocurrency exchanges, which were accused of “illegal operations” in January 2024.
Show cause notices have been issued to Binance and several other exchanges, banning them from operating in India. Nonetheless, in May 2024, Binance and KuCoin became the first offshore cryptocurrency companies to obtain conditional approval from the FIU on the condition of paying a fine after a hearing.
Violations and Regulatory Actions
The FIU’s recent announcement confirmed that the allegations against Binance were substantiated based on records and submissions made by Binance’s directors.
The investigation identified multiple violations by Binance, including failure to maintain and report transaction records, failure to provide required information to authorities, and failure to retain records as required by PMLA.
These violations indicate gross negligence in complying with India’s AML regulations, which are designed to prevent financial crimes such as money laundering and terrorist financing.
The FIU’s enforcement action highlights the importance of strict compliance with AML norms, especially for businesses 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 Investigations
Binance’s regulatory issues are not limited to India. In May 2024, the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) fined Binance $4.4 million. Canadian regulators noted that the exchange did not register as a foreign currency services business and did not report large transactions in digital assets, particularly those exceeding $10,000.
Binance appealed these claims, arguing that it complied with AML and terrorist financing regulations. Moreover, in February 2024, Nigerian authorities detained two Binance executives on charges of tax evasion and money laundering.
These incidents highlight the increasing global scrutiny Binance is facing from regulators in multiple jurisdictions. The exchange’s repeated clashes with regulators highlight the challenges global cryptocurrency platforms face in navigating a complex and diverse regulatory environment.