FINTRAC Fines Cryptocurrency Exchange KuCoin Nearly $20 Million

Representations of cryptocurrencies are seen in this illustration, August 10, 2022. Dado Ruvic/Illustration/Reuters

Canada’s anti-money laundering agency has fined the company that runs major cryptocurrency exchange KuCoin nearly $20 million, citing violations of Canadian money-laundering laws.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposed an administrative monetary penalty of $19,552,000 against Peken Global Limited, which operates as KuCoin, for three non-compliance violations, the agency said in a Sept. 25 news release.

The Seychelles-incorporated foreign money services business, which operates in Canada, has roughly 40 million global users and hosts more than $US9 billion in trading volumes daily.

The financial crimes watchdog says the company had failed to register with FINTRAC as a foreign money services business, failed to report suspicious transaction reports, and had not reported large virtual currency transactions as required.

KuCoin said in a Sept. 25 release that it “strongly disagrees” with the findings has appealed the penalty to the Federal Court of Canada. KuCoin says it shouldn’t be classified as a foreign money services business under Canadian law and considers the fine “excessive and punitive.”

“KuCoin has always strived to work constructively with regulators worldwide,” KuCoin CEO BC Wong said in the statement. “We disagree with this decision on both substantive and procedural grounds, and we have pursued all available legal avenues to ensure a fair outcome for KuCoin.”

KuCoin says it remains “fully committed” to operating transparently and complying with all applicable laws and will keep its community informed throughout the legal process.

Allegations

FINTRAC says it found 33 instances of KuCoin failing to report suspicious financial transactions that could be reasonably suspected to be related to money laundering or terrorist financing. The agency classifies this violation as “very serious.”

FINTRAC also said it identified transactions between KuCoin and large dark web or illegal digital marketplaces suspected of facilitating harmful cyber activities in Canada and selling illegal goods and services globally.

Additionally, FINTRAC says it identified 2,952 instances of KuCoin failing to report virtual currency transactions of $10,000 or more, which it considers to be a “minor” violation.

The federal financial department announced in March that it was strengthening Canada’s anti-money laundering and anti-terrorist financing framework to boost efforts to combat money laundering and its connection to transnational crime and drug trafficking, particularly fentanyl.

U.S. Penalties

KuCoin had previously been charged with violating U.S. anti-money laundering laws.

KuCoin pleaded guilty in January to operating an unlicensed money transmitting business in the United States and agreed to pay penalties of more than $297 million, according to a Jan. 27 press release from the U.S. Attorney’s Office.

The company was found to have failed to implement effective anti-money laundering and “know-your-customer” programs, report suspicious transactions, and register with the U.S. Department of Treasury’s Financial Crimes Enforcement Network.

The company agreed to leave the U.S. market for at least the next two years and pledged that two of KuCoin’s founders, Chun Gan and Ke Tang, who were indicted along with the company in March 2024, would no longer have any role in the company’s management or operations.

U.S. Attorney Danielle Sassoon said KuCoin avoided implementing required anti-money laundering policies “for years,” and allowed “unlawful” activity to be carried out through its platform.

“As a result, KuCoin was used to facilitate billions of dollars’ worth of suspicious transactions and to transmit potentially criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes,” Sassoon said in the release from the U.S. Attorney’s Office.

The Canadian Press contributed to this report.