KuCoin, a major cryptocurrency exchange, has been hit with a record-breaking anti-money laundering penalty in Canada, raising alarm across the crypto industry. The Seychelles-based platform faces a $14 million USD fine (over $19.5 million CAD) imposed by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This marks the largest fine ever issued by FINTRAC for failing to comply with Canada’s anti-money laundering rules.
FINTRAC explained that KuCoin failed to meet requirements under Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The agency stated that these rules are in place to protect the safety of Canadians and the security of the country’s economy.
Specific Violations by KuCoin
According to FINTRAC, KuCoin made multiple compliance errors. First, the exchange did not register as a foreign services money business, a key legal step required to operate in Canada. Registration ensures authorities can monitor and regulate financial activities that might pose risks.
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Second, the company failed to report large cryptocurrency transactions exceeding $10,000 CAD. Reporting these transactions is essential because it allows regulators to detect unusual or potentially illegal activity. Without such reporting, suspicious transactions can go unnoticed, creating opportunities for money laundering or other financial crimes.
Third, KuCoin did not file suspicious transaction reports even when there were grounds to do so. These reports are a vital tool for authorities to identify and investigate unusual activity, and failing to submit them is considered a serious breach of regulatory obligations.
FINTRAC highlighted that these oversights demonstrate a lack of compliance with Canada’s anti-money laundering and anti-terrorist financing rules, which are enforced to safeguard the country’s financial system.
KuCoin’s Response and Legal Action
In a statement, KuCoin said it respects the decision-making process but disagrees with the findings and penalty. The exchange argued that it should not be classified as a Foreign Money Services Business and described the fine as excessive and punitive.
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To challenge the decision, KuCoin has filed an appeal with Canada’s Federal Court. The appeal addresses both substantive grounds, questioning the basis of the fine, and procedural grounds, questioning how the penalty was applied. KuCoin emphasized that it remains committed to regulatory compliance and transparency despite disagreeing with the penalty.
The company’s move to appeal highlights how seriously regulators are being challenged in the growing cryptocurrency space, and it shows that crypto exchanges are increasingly navigating complex legal frameworks in multiple countries.
Background on Previous Legal Issues
This is not KuCoin’s first encounter with large-scale regulatory penalties. Earlier in the year, the exchange pleaded guilty in the United States for operating an unlicensed money transmitting business. As part of the settlement, KuCoin agreed to pay nearly $300 million in fines and forfeitures.
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Additionally, the company’s co-founders were required to forfeit $2.7 million in cash and subsequently left the firm. These actions underline the intense regulatory scrutiny cryptocurrency exchanges face internationally, as authorities continue to enforce compliance with both local and global financial rules.
FINTRAC stated that its anti-money laundering and anti-terrorist financing measures are crucial to protecting Canada’s economy. While the agency works with businesses to help them meet their obligations, it also stresses that strong actions will be taken when rules are not followed.
The record fine against KuCoin is significant not only because of its size but also because it highlights how governments are increasingly holding cryptocurrency platforms accountable for failing to follow established regulations.