FIU imposes ₹18.82 crore fine on Binance

The Financial Intelligence Unit under the Ministry of Finance has imposed a fine of ₹18.82 crore on Binance, the world’s largest cryptocurrency exchange by volume, for allegedly violating the Prevention of Money Laundering Act (PMLA), 2002. India requires virtual digital asset service providers like crypto exchanges to be registered with the FIU as a reporting entity and comply with its anti-money laundering rules.

Binance was one of the nine offshore crypto exchanges referred to as virtual digital asset service providers that received a notice dated December 28, 2023, from the FIU-IND for not complying with the PMLA law. These entities were then banned from operating in India "illegally" without registration with the intelligence unit in January this year.

Binance and KuCoin were the two of these nine exchanges that eventually registered with the intelligence unit to resume their operations.

The Financial Intelligence Unit is part of India's finance ministry and serves as the national agency for receiving, processing, analysing, and sharing information about suspicious financial transactions with its foreign counterparts and enforcement agencies. The Unit had then asked the ministry of electronics and information technology (MeitY) to block the URLs of the virtual digital asset service providers in India. Apple and Google too had removed the applications from their app stores. The ban helped domestic crypto exchanges that complied with the FIU guidelines.

Dilip Chenoy, chairman of Bharat Web3 Association, says, “The obligations are activity-based rather than dependent on physical presence in India, highlighting the objective to track and trace fraudulent activities effectively.”

FIU lifted the ban on Seychelles-based crypto exchange KuCoin in March. The exchange resumed its operations after paying a smaller fine of 34.5 lakhs in May. Speculation is that four more exchanges are set to register with FIU IND.

The penalty is imposed on account of the contravention of a slew of rules under Section 12 of the PMLA Act about due diligence, fair reporting record maintenance, and sharing access to information with the Director of FIU.

“Specific directions have been issued to Binance to ensure diligent compliance…for combating the financing of terrorism and prevention of money laundering activities,” said the press release issued by the financial watchdog on June 19.

“This significant penalty is a clear indication of the increasing scrutiny and regulation in the digital asset space,” said Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange. “The need for compliance is critical for user protection and to conduct business in a fearless environment. Sustained efforts by FIU-IND will lead to a fertile ground for Web3 businesses to grow,” added Thakral

Binance was founded by Changpeng Zhao in 2017. In recent years, Binance has faced regulatory backlash and stringent penalties from countries such as Canada and the US due to its ignorance of local licensing.

Till December 2023, India had a total of 31 cryptocurrency exchange entities registered with FIU.