The Financial Unit of India (FIU) recently imposed a fine of approximately $2.2 million (18.82 crore INR) on Binance. Binance, the world’s biggest cryptocurrency exchange was fined for providing its services to its Indian clients without adhering to the nation’s anti-money laundering rules, India’s anti-money laundering unit said in an announcement on Thursday. 

Binance functions as a Virtual Digital Asset Service Provider, making it a reporting entity (RE) under Section 2 (as) (vi) of the PMLA. This designation mandates the maintenance and reporting of transaction records and the implementation of robust AML measures. India requires virtual digital asset service providers like crypto exchanges to be registered with the FIU as a reporting entity and comply with its anti-money laundering rules. 

 In December 2023, Binance, along with 8 other cryptocurrency exchanges from abroad were issued notices by the Indian authorities for failing to complying with local regulations, after which they were all removed from India for “Operating illegally” in January 2024. The crypto exchanges included apart from Binance were KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. The watchdog also requested the Ministry of Electronics and Information Technology to block online access to the exchanges. Their apps were also delisted from Google and Apple app stores. 

However, Binance became the first foreign crypto-related entity alongside KuCoin to be approved by the Financial Unit of India (FIU) in May, which is only after a hearing with an FIU and then paying a fine. The crypto exchange was prohibited from operating in India for failing to comply with local regulations, as part of the financial watchdog’s crackdown on unregistered offshore crypto exchanges in the country. In contrast, rival crypto exchange KuCoin successfully registered and resumed operations after paying a fine of Rs 34.5 lakh. 

Since 2022, the Indian crypto industry has encountered significant challenges following the government’s introduction of a 30% tax on crypto earnings and a 1% tax deducted at source (TDS) on each trade. These stringent tax measures resulted in a sharp 90% decrease in daily average trades across major exchanges. 

The FIU announcement indicated that the charges against Binance were substantiated based on the available evidence, following the director’s written and oral submissions. Despite this, a Binance spokesperson stated that the company is reviewing the FIU’s order and has no intention of exiting the Indian market. The FIU’s fine on Binance cites several violations, including failing to maintain and report transaction records, not providing required information to authorities, and not preserving records as mandated. 

“Specific directions have also been issued to Binance to ensure diligent compliance with the obligations outlined in Chapter IV of the Prevention of Money Laundering Act (PMLA) of 2002, in conjunction with the PMLA Maintenance of Record Rules (PMLA Rules) of 2005 for the prevention of money laundering activities and combating the financing of terrorism (AMLCFT),” a notification by the FIU said.  

In May, Canada’s anti-money laundering agency also imposed a fine of $4.38 million on Binance for breaching anti-money laundering regulations. Former Binance CEO Changpeng Zhao was sentenced to four months in prison by U.S. District Judge Richard Jones in Seattle in May after admitting to violating the nation’s money laundering laws.