Crypto Companies Receive Record Fines for Money Controls
Data from the Financial Times reveals that in 2023, crypto companies faced more penalties for inadequate money controls than traditional financial firms, marking a significant shift. While crypto companies were fined a total of $5.8 billion for insufficient customer checks and anti-money laundering controls, their legacy counterparts paid only $835 million, the lowest in a decade.
Binance’s Massive Settlement Drives Discrepancy
The massive $4.3 billion settlement between Binance and the Department of Justice in November contributed to the significant discrepancy. Following the settlement, Binance’s founder and CEO, Changpeng Zhao (CZ), stepped down and pleaded guilty to sanctions violations. Dennis Kelleher, CEO of Better Markets, described this settlement as a warning to deter fraudulent conduct among crypto companies.
Historical Comparison: Banking Sector and Crypto Companies
Prior to 2023, the banking sector faced the highest fines for money laundering violations. Similar to crypto companies in 2023, the banking sector’s largest penalties were often driven by single multi-billion dollar settlements. For example, BNP Paribas’ $8.9 billion fine in 2015 accounted for most of that year’s total financial crime penalties.
Rising Trend in Crypto Fines
Although crypto fines are increasing, the industry recorded only 11 fines in 2023 compared to an average of 2 per year previously. David Lewis, former head of the Financial Action Task Force, expressed concern over the lack of oversight and regulation in the crypto industry and predicted further fines as risks associated with cryptocurrencies continue to grow.
Increased Regulatory Actions Against Crypto Firms
The Commodities and Futures Trading Commission (CFTC) revealed that nearly half of its enforcement actions in 2023 were targeted at crypto firms. Notable cases included Binance, FTX, and Celsius, along with their former leaders who faced regulatory actions.
Hot Take: Crypto Companies Face Record-Breaking Fines for Money Controls
Crypto companies have surpassed traditional financial firms in receiving fines for poor money controls in 2023. With a total of $5.8 billion in penalties, the crypto industry faces growing scrutiny from regulators and law enforcement agencies. The massive settlement between Binance and the Department of Justice played a significant role in driving this discrepancy. While the banking sector has historically faced large fines, 2023 marked a turning point with crypto companies taking the lead. As the risks associated with cryptocurrencies continue to increase, it is expected that further fines will be imposed on crypto firms. The lack of proper regulation and oversight remains a concern, providing opportunities for criminals to exploit loopholes within the industry.
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