India’s Financial Intelligence Unit Imposes $2.25M Fine on Binance for AML Violations

Jimmy Aki
Last Updated:

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

On July 19, India’s Financial Intelligence Unit (FIU) imposed a fine on Binance for failing to register with the regulator and comply with the country’s anti-money laundering (AML) regulations. This Binance $2.25 million fine highlights the exchange’s shortcomings in adhering to local financial laws, which has been a recurring challenge in the last few months.

Binance $2.25M Fine Stems from Illegal Operation

India’s Financial Intelligence Unit (FIU) announced a $2.25 million fine (188.2 million rupees) on Binance due to multiple violations of the Prevention of Money Laundering Act (PMLA), 2002.

The FIU’s detailed report explained:

“Consequently, due to Binance’s ongoing provision of services to Indian clients and operations within India without adhering to its statutory obligations under the PMLA, a Notice dated December 28, 2023, was issued to Binance pursuant to Section 13 of the Act, compelling Binance to demonstrate why appropriate action should not be undertaken against it for its dereliction of duties under the Act, despite its status as a Reporting Entity owing to its operations as a Virtual Digital Asset Service Provider (VDASP).”

The report detailed that on December 28, 2023, the FIU issued a notice to Binance, along with other major exchanges including Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex, for operating illegally in India. This prompted tech giants Apple and Google to remove these exchanges from their app stores in India in a bid to restrict local access.

Operating as a VDASP, Binance is classified as a reporting entity (RE) under Section 2(as)(vi) of the PMLA, thus requiring the exchange to report transaction records and comply with local anti-money laundering (AML) laws, including withholding tax on cryptocurrency transactions and earnings.

However, the FIU’s investigation revealed that Binance had failed to meet these obligations while serving Indian clients.

Recall that Binance completed its registration with the FIU and received conditional approval to continue offering crypto services to Indian residents in May 2024. This approval was contingent on Binance paying a penalty, which now amounts to $2.25 million, following a hearing with the FIU.

Binance Eyes India Return to Propel Global Dominance

The return of Binance to the Indian market is speculated to be a strategic move to maintain its global dominance. According to a Chainalysis report, India is one of the fastest-growing crypto economies, boasting the highest adoption rate as of 2023.

Binance $2.25 fine
India ranked as the fastest-growing crypto economy in 2023.

Prior to the December 2023 ban, Binance reportedly controlled over 90% of the Indian crypto trading volume, providing a platform for traders looking to circumvent tax implications imposed by the Indian government.

Meanwhile, Binance $2.25 million fine is just one in a series of regulatory challenges the exchange has faced globally. In May 2023, Binance was fined $4.38 million by Canada’s anti-money laundering agency for violating local AML regulations. Despite contesting the penalties, Binance announced its decision to exit the Canadian market in the same period.

The exchange’s regulatory troubles are particularly pronounced in the United States. Binance settled with the Justice Department for $4.3 billion and paid an additional $2.85 billion to the US commodities regulator.

Binance former CEO Changpeng Zhao pleaded guilty to money laundering charges and received a four-month prison sentence, while Binance.US, the platform’s US subsidiary, has also suffered consequences of the lawsuit filed by the US SEC. The woes of Binance.US also include the revocation of its money-transmitting license in seven states in the US.

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.