Binance Hit with $4.4M Fine by Canadian Regulator for AML and CFT Breaches

Jimmy Aki
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Canada’s financial regulator announced on May 9 that it had imposed a nearly C$6 million (approximately $4.4 million) fine on global exchange Binance for breaching the money laundering and terrorist financing laws in the country.

Binance Canada Fined for Service Registration Failure

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposed a fine on Binance for failing to register as a foreign money services business despite repeated deadlines.

This failure was coupled with a lack of reporting on receiving virtual currency worth C$10,000 or more on 5,902 separate occasions between June 1, 2021, and July 19, 2023.

Sarah Paquet, Director and Chief Executive Officer of FINTRAC highlighted the agency commitments to protect customers.

She said:

“Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime is in place to protect the safety of Canadians and the security of Canada’s economy. FINTRAC will continue to work with businesses to help them understand and comply with their obligations under the Act. We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”

These violations occurred as Binance Canada was in the process of winding down its operations in Canada in 2023, following its decision to exit the Canadian market due to regulatory concerns.

Binance called its withdrawal “proactive” in light of new guidance from the Canadian Securities Administrators (CSA), which was announced on February 22, 2023.

This guidance required exchanges to submit new preregistration undertakings and prohibited them from allowing Canadian clients to buy and sell any crypto asset regarded as a security or a derivative, and defined stablecoins as securities.

In response to these developments, Binance reportedly instructed its Canadian users to close all open positions by Sept. 30, 2023.

Meanwhile, this move was part of a broader trend, with OKX, dYdX, and Paxos also withdrawing from the Canadian market in March and April 2023.

Meanwhile, the CSA has compiled a list of 15 platforms that are “Authorized to Do Business with Canadians,” indicating that there are still options available for Canadian traders.

Binance Regulatory Turmoil Continues to Spread

FINTRAC’s recent fine on Binance Canada follows an exclusive Wall Street Journal (WSJ) investigative article, which allegedly revealed that the global exchange axed an employee on its surveillance team who reported potential market manipulation on the exchange.

According to the article, the employee had identified instances of pump-and-dump schemes and wash trading conducted by “VIP” clients, which included $300M by DWF Labs, a global digital asset market maker and Web3 investment firm.

DWF Labs also faced allegations of manipulating the prices of various cryptocurrencies, such as the YGG token, leading the employee to recommend their removal from the platform. Binance conducted an investigation into the team’s findings but concluded that there was insufficient evidence of wash trading by DWF Labs. Subsequently, the head of surveillance was dismissed, as reported by the WSJ.

Although Binance and the asset market maker denied WSJ’s allegations, experts believe there will be intensified scrutiny of the exchange’s operations amid concerns about its commitment to ensuring a fair trading environment.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.