Crypto and Digital Payments firms  Regulatory Fines

A Financial Times report reveals that, for the first time, crypto and digital payments companies faced more substantial fines for compliance lapses than traditional financial institutions in 2023. The fines levied against these emerging sectors totaled $5.8 billion, dwarfing the $835 million in fines paid by traditional financial services firms, marking the lowest level in a decade.

The fines were imposed for deficiencies in customer due diligence, anti-money laundering controls, sanctions violations, and other financial crime risks. Notably, a significant portion of the sum included a landmark $4.3 billion penalty against cryptocurrency exchange Binance, serving as a stark warning to the crypto industry.

The data, compiled by compliance software provider Fenergo, indicates a shift in regulatory focus and heightened scrutiny on crypto platforms. The report underscores the urgency for robust compliance measures within the crypto and digital payments sector.

Dennis Kelleher, CEO of Better Markets, stated that the figures reflected more on bad practices in newer financial sectors than an improvement in traditional banks. He emphasised the need to address the pervasive fraud and criminality in the high-profile crypto arena, diverting regulators’ and prosecutors’ resources to curb egregious conduct.

The number of fines against crypto and payment providers increased significantly in 2023, with crypto firms facing 11 fines, compared to an average of less than two in previous years. Payment firms received 27 fines, exceeding their average of about five per year from 2018 to 2022.

Regulators in various jurisdictions have been urging payments firms to enhance compliance, with the UK’s Financial Conduct Authority highlighting the “unacceptable” risks posed by the sector in 2023.

While fines against crypto and payments groups could continue to rise as new regulatory regimes are introduced, some experts anticipate a potential decline in fines in the coming years, given the increased regulatory control and maturity of the crypto industry. However, the regulatory landscape remains dynamic, with ongoing efforts to address financial crime risks across various sectors.

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