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Crypto & Fintech Firms Hit with $5.8 Billion in Fines Amid Global Clampdown on Illegal Funds

Last Updated January 9, 2024 1:05 PM
Teuta Franjkovic
Last Updated January 9, 2024 1:05 PM
Key Takeaways
  • Crypto and fintech firms faced more fines for inadequate controls than the entire traditional financial sector in 2023.
  • Global authorities are cracking down on illicit money flows.
  • Regulators are sending a strong message to payment firms.

Last year marked a significant regulatory shift as crypto and fintech groups faced more fines for inadequate controls  than the entire traditional financial sector.

This crackdown by global authorities targeted illicit money flows in these emerging areas of finance.

Crypto Firms Face Record $5.8 Billion in Fines for Compliance Lapses

An in-depth analysis  indicates that companies in the cryptocurrency and digital payments sectors incurred a total of $5.8 billion in fines due to various compliance shortcomings. These included insufficient customer checks, inadequate anti-money laundering measures, and non-compliance with sanctions and other financial crime regulations.

Of this $5.8 billion, a notable $4.3 billion penalty was imposed on the crypto exchange Binance. This fine, seen as a stern warning from US prosecutors, significantly exceeded the $835 million paid in fines by traditional financial services groups last year, which was the lowest in a decade.

Dennis Kelleher, CEO of Better Markets, a Washington-based organization advocating for stricter regulation, commented  that these figures are more indicative of poor practices in the newer sectors of finance rather than signaling an improvement in traditional banking.

He said: “The pervasive fraud and criminality in the high-profile crypto arena forced regulators and prosecutors to divert resources.”


Kelleher also called it an endeavor to “stop the egregious conduct and try to deter it from getting even worse”.

Money laundering fines
Credit: FT/Fenergo

Data gathered by compliance software provider Fenergo revealed that total fines for money laundering and other financial crime violations increased by over 30% to $6.6 billion. However, this figure is still significantly lower than the 2015 peak of $11.3 billion.

Facing Surge in Fines, Growing Regulatory Scrutiny

The annual totals have been greatly influenced by several multibillion-dollar penalties. Notable examples include the fine against Binance last year, BNP Paribas’s $8.9 billion sanction  for violations in 2015, and Goldman Sachs’s $5 billion  in 2020 related to issues with Malaysia’s 1MDB sovereign wealth fund.

There was a marked increase in the number of fines levied against cryptocurrency and payment providers last year. Cryptocurrency firms faced 11 fines compared to an average of less than two annually over the previous five years. Payment companies were subject to 27 fines, significantly higher than their annual average of about five from 2018 to 2022. It’s notable that almost all of the payments groups fined last year have been established for less than 20 years.

David Lewis, a former head of the Financial Action Task Force, the world’s money laundering and terrorist financing watchdog said :

“Most jurisdictions have yet to regulate crypto firms in line with global standards, so we can expect further fines to come in this area. This lack of oversight and proper regulation is a real concern as the risks of cryptos continue to increase, and criminals seek to exploit loopholes wherever they can.”

Ramping Up Pressure on Payment Firms

Regulatory bodies across various jurisdictions have been issuing warnings to payment firms to bolster their practices. The UK’s Financial Conduct Authority, in particular, last year pointed out the “unacceptable” risks associated with the sector.

Charles Kerrigan, a crypto specialist and partner at the law firm CMS, believes that fines in the crypto sector are likely to decrease due to the increased regulatory control compared to its early days.

He mentioned :

“It’s got to a point now where law enforcement are openly saying they wish people would use crypto to commit crimes but you’d have to be mad to do that.”

Kerrigan also opined that the crypto market, with its global market capitalization of just $1.8 trillion, is not substantial enough to significantly fuel financial crime or be a major source of financial crime fines in the long term.

He added :

“There will be fines because regulators want to make a point about crypto.”

The truth is, as the cryptocurrency and digital payments sectors continue to grow, so will the regulatory scrutiny. Payment companies and other participants in these markets need to prepare to meet the increased demands for compliance and transparency.

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