Crypto Exchange Pleads Guilty to AML Violations

A cryptocurrency exchange and trading platform pled guilty to one count of operating a money transmitting business without registering with FinCEN.

According to the Plea Agreement, despite its official policy prohibiting US persons from entering into transactions on the exchange, the platform knowingly allowed US traders access, circumventing geographic restrictions through VPNs and third-party brokers. The government alleged a number of consequential AML failures required of registered money transmitting businesses, including (i) violations of KYC regulations, (ii) unlawfully instructing US citizens on how they can trade on the platform, (iii) unlawfully marketing to US institutional customers, (iv) inadequate monitoring and detection of suspicious activity, and (v) having inadequate controls to determine whether parties to transactions were subject to government sanctions.

In a press release, Acting US Attorney Matthew Podolsky stated: "For over seven years, [the exchange] knowingly violated anti-money laundering laws and avoided implementing required policies to prevent criminals from abusing our financial system." The prosecutor stated that the exchange "was used to facilitate over five billion dollars' worth of suspicious transactions and criminal proceeds."

The exchange agreed to pay a criminal fine of approximately $84 million, which reflected a 25% discount off of the sentencing guidelines for cooperation (e.g. the exchange retained an external compliance consultant to develop policies preventing US persons from transacting on its platform). The exchange also agreed to forfeit approximately $420 million "representing property involved in said offense."