Canada's anti-money laundering agency imposed a $6 million fine on the world's largest cryptocurrency exchange, Binance Holdings Ltd., the first monetary sanction issued by the financial intelligence unit against a virtual currency trading platform.
Canada's Financial Transactions and Reports Analysis Centre, or FinTRAC, imposed the sanction this week after finding that Binance had committed two violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The first violation was that it had not registered as a foreign money services business, FinTRAC said Thursday.
Binance withdrew from the Canadian market last year, citing new regulatory guidelines for cryptocurrency trading platforms.
However, FinTRAC said the company violated its registration requirements before September 25, when it officially ceased all operations in the country. Binance had been given several opportunities to register but missed the deadlines, FinTRAC said.
The second breach relates to large virtual currency transactions, which are a red flag for possible money laundering activity. Companies such as banks, real estate brokers, casinos and money services businesses (MSBs) are required to report certain transactions, including suspicious ones and those involving large sums of cash or virtual currency, to the financial intelligence agency.
FinTRAC says it analyzed the blockchain, the public ledger of all cryptocurrency transactions, and found 5,902 transactions valued at the reporting threshold of $10,000 or more that Binance had not reported between June 1, 2021. and July 19, 2023.
Binance did not respond to a request for comment.
There are hundreds of cryptocurrency companies registered with FinTRAC. Approximately 800 of the almost 3,000 registered MSBs provide some virtual currency services, according to the watchdog, while another 200 or so They are exclusively crypto platforms.
South of the border, Binance agreed to pay $4.3 billion late last year as part of a plea deal after admitting failures in its anti-money laundering controls.
Jessica Davis, president and senior consultant at advisory firm Insight Threat Intelligence, said the penalties imposed by FinTRAC are significantly lower than what Binance pays in the US due to differences between the two countries' legal systems.
In Canada, the administrative sanctions that FinTRAC can impose are not intended to be punitive, Ms. Davis said. Instead, the regulator takes a more collaborative approach, working with companies to ensure they comply.
Even the recent fines paid by several of the country's large banks โ including the fine of almost 9.2 million dollars charged to Toronto-Dominion Bank, the largest in FinTRAC history, amount to a โrounding errorโ for companies with billions in quarterly profits, Ms. Davis said.
South of the border, TD Bank expects to pay a lot more. The bank announced late last month that has set aside $450 million to cover sanctions related to a lengthy regulatory and police investigation in the United States, although analysts they are waiting he counts to go even higher.
"There's really an upper limit to how much money we're going to talk about in Canada, under the regime as it stands," Ms. Davis said. That contrasts with the United States, where taxes can be punitive, she added.
โIn really serious cases of non-compliance in Canada, instead of getting a really big fine, they would be referred for criminal non-compliance to the RCMP,โ Ms. Davis said.
However, he added, the RCMP has a lot of competing priorities and doesn't always act on those revelations. โThey don't have enough resources, staff or skills to do that kind of investigative work. Sometimes we see results of those non-compliance disclosures, but it is quite rare,โ he noted.
Binance faces legal problems in several jurisdictions. Two Binance executives were recently arrested in Nigeria on charges of tax evasion and money laundering.
Meanwhile, the exchange's founder, billionaire Changpeng Zhao, 47, has been sentenced to four months in prison in the United States after admitting to evading anti-money laundering rules. Prosecutors said the company failed to report suspicious transactions involving designated terrorist groups such as Hamas and the Islamic State.
Mr. Zhao's sentencing comes amid a global crackdown on the cryptocurrency sector. Earlier this year, Sam Bankman-Fried received a 25-year prison sentence in the US for his role in defrauding users of his now-collapsed FTX cryptocurrency exchange.
Before its implosion at the end of 2022, FTX had plans will launch in Canada through the acquisition of Bitvo Inc., a Calgary-based crypto exchange regulated by Canada's 13 provincial and territorial securities commissions.
