Binance makes history…of Canadian penalties

The largest crypto-asset trading platform in the world had to pay a (small) fine. (Photo: 123RF)

THE KEYS TO CRYPTO is a section that patiently decodes the world of cryptocurrency and its stock market, industrial and media upheavals. François Remy’s mission is to identify promising entrepreneurs, decode technical progress and anticipate the industrial and societal impacts of this digital currency.

(Illustration: Camille Charbonneau)

THE KEYS TO CRYPTO. The world’s largest crypto-asset exchange platform has become the first company in the sector born with bitcoin to receive a financial penalty from the Financial Transactions and Reports Analysis Center of Canada (FINTRAC).

This is a title that any society could do without. Of the two hundred crypto-exchanges registered with FINTRAC, Binance Holdings Ltd. is the first to receive a financial penalty.

In question, two administrative violations: the failure to register as a foreign money services business with the analysis center and the failure to submit large transaction reports for sums of $10,000 or more. We are not talking here about any isolated oversight, but about breaches of obligations encountered on 5,902 occasions between June 1, 2021 and July 19, 2023.

“We will firmly ensure that businesses continue to do their part and that we will take appropriate measures if necessary,” said Sarah Paquet, CEO of FINTRAC.

Like casinos, brokers, real estate agents and other sectors of financial or monetary activity, Binance had to fulfill obligations under the Proceeds of Crime Laundering Act, such as verifying the identity of clients, maintain a compliance regime, report certain transactions such as international wire transfers, large transfers in cash or “virtual currency”, as well as flag suspicious transactions. The bill ultimately amounted to some 6 million Canadian dollars.

A trifle compared to the hefty bill of 4 billion US dollars demanded by the United States as part of an agreement last November following a failure in anti-money laundering controls.

“Binance became the world’s largest crypto exchange in part thanks to the crimes it committed — it is now paying one of the largest corporate fines in U.S. history,”

This shows the contrast between the punitive approach of the American amounts and the Canadian administrative penalties, which rather aim at collaboration with companies in order to modify their non-compliant behavior. And in the event of aggravated non-compliance, Canada will not require a subsequent fine, but will instead forward the potentially criminal file to the Royal Canadian Mounted Police (RCMP).

This case would still have to be among the priorities of the RCMP “which lacks the resources, personnel and skills to carry out this type of investigative work,” indicates Jessica Davis, president of the consulting firm Insight Threat Intelligence, questioned by the Globe and Mail.

Is there a fine line between disruptor and criminal? For years, detractors have pointed to questionable business practices and “Binance’s propensity to play by its own rules” by playing the sorcerer’s apprentice of finance.

In rehabilitation efforts, the crypto giant has hired former regulators, US tax officials and even Europol investigators. Suddenly more Catholic than the Pope, Binance is preaching for more crypto regulation on a global scale.

Once considered the most powerful figure in the crypto industry, Changpeng Zhao, the founder and former CEO of Binance, was sentenced on May 1 to four months in prison. The one who believed that pleaded guilty to violating U.S. anti-money laundering laws.

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