India’s financial watchdog issued charges against Binance after reviewing written and oral submissions from the Binance Director and available company records.

India's Financial Intelligence Unit (FIU-IND) has levied a fine of 188.2 million rupees ($2.25 million) on the cryptocurrency exchange Binance for violating the nation’s Anti-Money Laundering (AML) regulations. The penalty highlights multiple breaches of the Prevention of Money Laundering Act (PMLA), 2002, and emphasizes the growing scrutiny on cryptocurrency exchanges operating within the country.

Background of the Case

Binance, as a Virtual Digital Asset Service Provider, qualifies as a reporting entity under Section 2(sa)(vi) of the PMLA. This designation mandates Binance to maintain and report transaction records and implement robust AML measures. However, FIU-IND’s investigation revealed several violations by Binance while providing services to Indian clients. These violations include:

- Failure to maintain and report transaction records
- Not furnishing required information to authorities.
- Not preserving records as mandated by law.

In January 2024, Indian authorities issued show-cause notices to Binance and other offshore cryptocurrency exchanges, removing them from the Indian market for operating illegally. Despite this, Binance and KuCoin received conditional approval from FIU-IND in May 2024, contingent on paying penalties after a formal hearing.

Regulatory Action and Violations

After reviewing written and oral submissions from Binance's Director, FIU-IND found the charges substantiated. The violations included:
- Failure to adhere to transaction reporting obligations.
- Inadequate implementation of AML measures.
- Non-compliance with record preservation requirements.

Global Regulatory Scrutiny

Binance's regulatory challenges extend beyond India. Other countries have also imposed penalties on the exchange for AML violations:

1. Canada: In May 2024, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposed a $4.4 million penalty on Binance for failing to register and report large digital asset transactions exceeding $10,000. Binance has appealed against these allegations.

2. Nigeria: In February 2024, Nigerian authorities detained two Binance executives following accusations of tax evasion and money laundering.

Implications for the Crypto Industry

The fines and regulatory actions against Binance underscore the increasing regulatory scrutiny on cryptocurrency exchanges worldwide. As countries tighten their AML and Countering the Financing of Terrorism (CFT) regulations, cryptocurrency exchanges must enhance their compliance measures to avoid substantial penalties and ensure their operations are in line with legal requirements.

Conclusion

The fine imposed by India’s FIU-IND on Binance highlights the critical need for cryptocurrency exchanges to strictly adhere to AML regulations and other compliance requirements. As global regulatory bodies continue to monitor and enforce financial laws, exchanges operating in multiple jurisdictions must prioritize compliance to maintain their operations and avoid legal repercussions. The growing scrutiny also emphasizes the importance of robust AML measures to ensure the legitimacy and stability of the cryptocurrency market.