Binance fined $2.2 million for anti-money laundering violations in India

Key Takeaways

• Binance was fined $2.2 million (INR 1882 crore) by the Financial Intelligence Unit (FIU) of India for violating AML regulations.
• This punitive measure comes after a series of compliance notices were issued to Binance and eight other foreign cryptocurrency exchanges last year.

Binance, the world’s largest cryptocurrency exchange, was fined approximately $2.2 million (INR 18.82 billion won) by India’s Financial Intelligence Unit (FIU) for violating anti-money laundering regulations.

Ongoing regulatory crackdown

This punitive measure comes after a series of measures. Compliance notices have been issued to Binance and eight other foreign cryptocurrency exchanges. last year. In January 2024, these entities were expelled from India for ‘illegal operations’.

The FIU’s decision to impose a fine followed a comprehensive hearing that considered both written and oral submissions, reaching the conclusion that Binance had in fact violated the country’s strict anti-money laundering norms.

According to the FIU announcement, “After considering Binance’s written and oral submissions, the Director of FIU-IND found that the allegations against Binance were substantiated based on materials available in the record. As a result, the Director, FIU-IND dated 19.06.2024, in exercise of powers under Section 13 of PMLA, imposed fines totaling Rs. 18,82,00,000 (Rupees 18 Crore 82 Lakh) on Binance.”

Market re-entry and regulatory compliance failures

Binance, along with KuCoin, received conditional approval from the FIU to resume operations in India in May if it complies with a series of compliance requirements. The FIU’s announcement emphasized the importance of regulatory compliance in fostering a secure and transparent digital asset ecosystem, emphasizing the need for Binance to “comply with its obligations diligently.”

“Specific guidelines have also been issued to Binance to ensure diligent compliance with the obligations outlined in Chapter IV of the Prevention of Money Laundering Act, 2002 (PMLA) together with the PMLA Records Maintenance Rules, 2005 (PMLA Rules). “To prevent money laundering activities and combat the financing of terrorism (AML/CFT).”

Industry reaction and future implications

Shivam Thakral, CEO of BuyUcoin, said about the development: “These significant penalties clearly indicate the increasing scrutiny and regulation of the digital asset space. “To successfully navigate this evolving environment, it is important to stay informed and aware of these developments.”

Thakral’s comments reflect broader sentiment within the industry, which is increasingly aware of the need for a strong regulatory framework. He further added, “The need for regulatory compliance is critical to protecting users and conducting business in a fear-free environment. FIU-IND’s continued efforts will create a fertile ground for Web3 businesses to grow and make India a trillion-dollar digital economy.”

The enforcement action against Binance is seen as a significant moment for India’s virtual digital asset service providers (VASPs). Thakral emphasized the need for collaboration within the industry to create a growth-oriented ecosystem.

“VASPs in India must work together to create a growth-oriented ecosystem for the digital asset industry. We strongly believe that constructive dialogue between regulators and industry players will lead to a more mature and consumer-friendly digital asset market in India,” he added.

Manhar Garegrat, Country Head, India and Global Partnerships, Liminal Custody, said: “The developments related to Binance that we are observing at FIU-IND are very organic and are an important indicator of India’s progress in regulating the country’s digital asset markets. “Common regulations for all stakeholders and companies, regionally and globally, will ensure a level playing field for industry participants and provide equal growth opportunities for all relevant stakeholders in the industry.”

“With India being a lucrative market for global brands with a large young and ambitious demographic and a growing number of seasoned investors, it has become extremely important for regulators to protect the interests of users and consumers across all sectors. Along with ETFs seeing tremendous growth in the global investment space, the digital asset sector continues to grow significantly. According to the research report, India is one of the best countries in terms of digital asset ownership. “With such a large digital asset market, it is essential to implement a regulatory framework to protect user funds and provide a business-friendly environment,” he added.

Manhar also noted that Liminal has taken the lead in adjusting regulatory policies and obtaining the necessary licenses for operations in APAC and MENA, with a greater focus on India and the UAE. “Liminal recently became the first digital asset custodian to become FIU-IND compliant. Liminal has also received final approval for a Financial Services Permit (FSP) from the Abu Dhabi Global Markets (ADGM) Financial Services Regulatory Authority (FSRA). “This license gives Liminal the ability to act as a regulated custodian within the fast-growing financial hub of the Middle East,” he said.

This fine highlights the Indian government’s commitment to strengthening regulatory oversight in the rapidly evolving digital asset sector.

Also Read: Binance Founder CZ Sentenced to Just 4 Months in Prison for Money Laundering Violations