Indian Financial Intelligence Unit penalizes Binance for non-compliance with anti-money laundering laws

author Ashneet Hanspal

calender June 21, 2024

Indian Financial Intelligence Unit penalizes Binance for non-compliance with anti-money laundering laws

India’s Financial Intelligence Unit (“FIU-IND”) vide a recent order (dated June 19, 2024) (“Order”) has imposed a substantial monetary penalty – to the tune of INR 188200000 / Indian Rupees Eighteen Crore Eight Two Lakh Only (approx. USD 2.25 million) – on the prominent cryptocurrency exchange Binance, for violations committed by Binance under the Prevention of Money Laundering Act, 2002 (“PMLA”).

For context, all (domestic and foreign) virtual digital asset service providers (“VDA SPs”) operating in India (by offering services to Indian residents) qualify as “reporting entities” under the PMLA and are required to observe compliance thereunder. Binance constitutes one of several offshore VDA SPs which had received show-causenotices from the FIU-IND earlier this year (inter-alia requiring them to register with the FIU-IND in compliance with the statutory requirements in India) and were subsequently barred from operating in India. The Order comes in the wake of Binance approaching the FIU-IND for onboarding as a reporting entity.

The Order summarily mentions that the fine was imposed on Binance on account of its previous defaults of the PMLA [under Section 12(1)] read with the relevant provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (“PMLR”), which were identified during its registration process with the FIU-IND (as a “reporting entity”). For reference, the relevant provision of the PMLA inter-alia mandates reporting entities (such as Binance) to maintain records of all client transactions as well as documentation evidencing identities of relevant clients and to furnish them to the Director, FIU-IND in compliance with timelines prescribed under PMLA.

From the relevant Order, it appears that FIU-IND has pulled up Binance for failing to comply with the directives to implement and report relevant transactions (including suspicious transactions) under the PMLA (read with the PMLR) as well as for failing to designate and furnish information regarding the personnel statutorily required to be appointed for compliance under PMLA. Further, the Order mentions that specific directions have also been issued to Binance to ensure compliance with the obligations outlined in the PMLA and PMLR.

It is worthwhile to note that Binance is the second offshore VDA SP (after the cryptocurrency exchange, KU Coin) which seems poised to receive approval to operate and offer services in the Indian market (upon payment of the stipulated penalty).

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