India’s Financial Intelligence Unit (FIU) has levied a substantial fine on Binance, the world’s largest cryptocurrency exchange. The penalty, amounting to ₹18.82 crore ($2.25 million), was imposed for multiple violations of anti-money laundering (AML) regulations under the Prevention of Money Laundering Act (PMLA) of 2002. The development comes a few weeks after the crypto exchange pulled the plug on the cash payment option for peer to peer (P2P) trades in India.
The roots of the penalty lie in Binance’s past operations within India. The crypto exchange, operating as a Virtual Digital Asset Service Provider, falls under the category of a reporting entity according to Section 2 (as) (vi) of the PMLA. This classification mandates the exchange to maintain comprehensive records of transactions and ensure robust AML measures are in place. However, an investigation by the FIU revealed significant lapses in Binance’s compliance with these statutory obligations while servicing Indian clients.
In December 2023, the FIU issued show-cause notices to Binance and eight other offshore cryptocurrency exchanges for operating in India without adhering to local AML regulations. The Ministry of Electronics and Information Technology (MeitY) subsequently blocked the URLs of these exchanges earlier this year, in January.
Later, in May, Binance, along with another cryptocurrency exchange, KuCoin, received conditional approval from the FIU to operate within India. This approval was contingent upon the payment of penalties after a regulatory hearing. Despite this initial step towards compliance, Binance continued to attract scrutiny from the FIU, which found the charges against the exchange substantiated upon reviewing written and oral submissions from Binance representatives. Finally, the FIU imposed the massive penalty of ₹18.82 crore on the cryptocurrency exchange, stating that it was for the exchange’s failure to comply with the obligations outlined in Chapter IV of the PMLA and the PMLA Maintenance of Record Rules of 2005.
“After considering the written and oral submissions of Binance, the Director, FIU-IND, based on the material available on record, found that the charges against Binance were substantiated,” read a notification issued by the FIU. “Furthermore, specific directions have also been issued to Binance to ensure diligent compliance with the obligations outlined in Chapter IV of the Prevention of Money Laundering Act (PMLA) of 2002, in conjunction with the PMLA Maintenance of Record Rules (PMLA Rules) of 2005 for prevention of money laundering activities and combating the financing of terrorism (AMLCFT),” it added.
The fine imposed by India’s FIU is not an isolated incident for Binance. The exchange has faced regulatory challenges globally. In May 2024, Canada’s financial watchdog fined Binance $4.4 million for violating AML and terrorist financing laws. Additionally, Binance’s former CEO, Changpeng Zhao, was sentenced to four months in prison in the US earlier this year for breaching similar regulations. Canada’s anti-money laundering agency also imposed a financial penalty of $4.38 million on Binance for violation of anti-money laundering regulations last month (and the crypto exchange has already filed an appeal for the same).
“The crypto ecosystem in India is undeniably experiencing growth, and any significant shift towards compliance and regulatory frameworks is a positive development for the industry. The recent initiatives to bring exchanges under the PMLA guidelines by the Financial Intelligence Unit (FIU) have brought legitimacy to the space, reinforcing trust among investors and other stakeholders. These are positive steps in the right direction,” Sumit Gupta, co-founder of CoinDCX, commented on the matter. “As the leading exchange in India, we welcome this progress and remain committed to driving the industry forward in a responsible and sustainable manner. CoinDCX has proactively taken steps to enhance trust and compliance, leveraging technological tools and assembling dedicated compliance and legal teams.”
