India’s Financial Intelligence Unit (FIU) has imposed a fine of 188.2 million rupees ($2.25 million) on Binance for operating in violation of local anti-money laundering (AML) regulations.
India mandates that virtual digital asset service providers, including crypto exchanges, must register with the FIU as a reporting entity and adhere to its AML rules. Binance, which resumed operations in India in May after registering with the FIU, was penalized for previous non-compliance.
The FIU issued show-cause notices to nine offshore exchanges, including Binance, for operating without proper authorization and asked the Ministry of Electronics and Information Technology to block access to these exchanges.
The FIU’s notice targeted a range of prominent crypto exchanges such as Binance, Kraken, Kucoin, Bittrex, Gate.io, Bitstamp, Bitfinex, and MEXC Global, alleging that they are operating illegally in India and failing to comply with the Prevention of Money Laundering Act.
Binance’s prior market dominance might have been helped by non-compliance with local tax laws that otherwise would require users to pay a 1% tax deducted at source on transactions. This re-entry follows a broader global pattern where Binance has been working to improve its regulatory compliance in response to increasing scrutiny by financial authorities worldwide.
Rival exchange KuCoin, which registered with the FIU in March, was also hit with 3.45 million rupees penalty for similar violations.
India currently has 48 crypto entities registered as reporting entities under the Prevention of Money Laundering Act, Aggarwal disclosed. This marks the first time the FIU has officially addressed the press about crypto, following meetings with representatives of all 48 entities.
Binance has also faced regulatory actions in other jurisdictions; in May, Canada’s anti-money laundering agency fined the exchange $4.38 million for AML rule violations.
Additionally, Changpeng Zhao, the former CEO of Binance, was sentenced to four months in prison by U.S. District Judge Richard Jones in Seattle in May after pleading guilty to violating U.S. anti-money laundering laws.