Crypto Firms Faced Nearly $6B in Fines in 2023 for AML Violations

Crypto firms faced substantial regulatory action, collectively paying nearly $6 billion in fines primarily due to Anti-Money Laundering (AML) violations and deficiencies in customer checks last year.

This marks a significant development, as crypto and fintech groups experienced higher fines for inadequate controls than the entire traditional financial system for the first time.

Crypto-Related Fines Surge

The total fines of $5.8 billion in 2023, including a substantial $4.3 billion penalty against the crypto exchange Binance, were characterized as a warning by U.S. prosecutors. The amount significantly surpassed the $835 million paid by traditional financial services groups, marking the lowest level in a decade.

Dennis Kelleher, CEO of Washington-based Better markets, an advocate for stricter regulation, commented that these figures reflect more on issues in newer finance sectors rather than an improvement in traditional banks.

He highlighted that the widespread fraud and criminality in the prominent crypto industry prompted regulators and prosecutors to allocate resources toward curtailing such behavior and preventing its escalation.

Data compiled by compliance software provider Fenergo revealed that fines for money laundering and other financial crime violations increased over 30% to $6.6 billion. However, it remained below the peak of $11.3 billion in 2015.

Last year saw a notable increase in fines against crypto and payment providers. Crypto firms faced 11 fines, a significant rise from an average of less than two per year in the previous five years.

David Lewis, ex-Financial Action Task Force head and current Kroll anti-money laundering chief, flags concerns over crypto firms’ oversight in various jurisdictions. He emphasizes rising risks and advocates for global standards to curb criminal exploitation of regulatory gaps.

Crypto Fines Could Increase Further

Andrew Barber, a partner at Pinsent Masons, anticipates that fines against crypto and payments groups may rise further in the coming years as governments implement new regulatory regimes.

Firms that previously operated without significant regulatory oversight will likely need time to adjust, and the scrutiny on their anti-money laundering (AML) controls is expected to intensify.

Charles Kerrigan, a crypto specialist and partner at law firm CMS, believes that fines may decrease in the coming years because the crypto industry is now more tightly controlled compared to its early stages.

Kerrigan also points out that the global market cap of crypto is $1.8 trillion, significantly smaller than the hundreds of trillions of assets in the traditional financial system. Despite this, he acknowledges that fines may still occur as regulators aim to make a point about crypto.