9 January 2024

Data collated by Fenergo and analysed by the Financial Times has shown that in 2023, digital asset firms paid $5.8bn to global authorities in fines for transgressions. The largest, and most headline-grabbing of the fines was the $4.3bn fine for Binance in the US.
 
In its analysis, the FT states that fines to the digital assets sector were issued predominantly for shortfalls in ‘know your customer’ (KYC) checks and transaction monitoring (TM), with fines for failures in anti-money laundering controls, upholding sanctions, as well as other financial crimes. 
 
It is important to note that these statistics should not be inferred as indicating that digital assets fuel criminality. A historic lack of regulatory controls and authorities wishing to show they take a tough stance on non-compliance by digital asset firms are both outlined by CMS’s Charles Kerrigan in the FT article to explain the particularly high figure for fines. Kerrigan also makes the point that the global market cap of digital assets is not large enough to be a significant source of financial crime compared to traditional finance, as well as the flaws in attempting to use digital asset technologies for crime.
 
However, what the $5.8bn figure does reveal is how the digital assets sector is particularly exposed to compliance challenges by its very nature as a young, developing industry. A lack of regulatory oversight from authorities, combined with the urgency to innovate, grow, and become profitable can leave companies open to exploitation by criminal elements when KYC and TM are lacking. 
 
As such, it is critical to the future-proofing of businesses within the digital assets space to ensure compliance in the jurisdictions they operate, particularly regarding proper due diligence on KYC and TM, to avoid the financial and reputational damage that comes with receiving fines. 
 
At Appold we can’t speed up the clarity and implementation of regulatory policy and oversight (we are trying!) but we can assist companies and institutions in the implementation of policies, procedures, reporting and clear internal guidelines on dealing with digital assets. Our advice is to treat all of these assets under the same strict rules as traditional assets to protect and adhere early to future and potentially abrupt policy changes. See ahead, stay ahead.

Read the FT's article at:
Crypto and fintech groups fined $5.8bn in global crackdown on illicit money

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