Cryptocurrency exchange KuCoin is currently appealing a significant enforcement action imposed by Canadian regulatory authorities, which accused the firm of neglecting the registration requirements for money-services businesses and failing to implement adequate measures against money laundering activities.
The penalty, exceeding $19 million CAD (approximately $14 million USD), was levied by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) following an investigation that revealed the Seychelles-based Peken Global Limited, operating under the KuCoin brand, did not properly report substantial cryptocurrency transactions. The agency stated that the exchange failed to identify and flag suspicious activities that could be linked to money laundering or terrorist financing.
According to FINTRAC’s findings released earlier this week, KuCoin did not report large-scale crypto transactions on nearly 3,000 occasions between 2021 and 2024. The regulatory body pointed out that on 33 separate instances, the exchange allegedly overlooked the necessity to report financial transactions that raised reasonable suspicion of being associated with money laundering or efforts to fund terrorism.
In response, KuCoin has filed an appeal with the Federal Court of Canada, challenging the enforcement action on both procedural and substantive grounds. In a statement issued on Thursday, the company expressed its appreciation for the regulatory process but disagreed with the conclusions drawn. KuCoin asserts that it is not a Foreign Money Services Business, as classified by FINTRAC, and characterizes the imposed penalty as disproportionately severe and punitive.
“While KuCoin respects the decision-making process and remains committed to regulatory compliance and transparency, it disagrees with both the finding that KuCoin is a Foreign Money Services Business and the penalty imposed,” the company noted.
This hefty fine accounts for a significant portion of the total penalties issued by FINTRAC in the past year, which has seen the agency impose fines 23 times, accumulating to around $25 million CAD. The regulator has indicated that the breaches committed by KuCoin were serious in nature, particularly concerning the allegations related to the failure to report suspicious transactions, deemed “severe” by the agency.
KuCoin’s regulatory challenges are not isolated to Canada. The exchange has faced penalties in various jurisdictions, including a notable reprimand from the Ontario Securities Commission in 2023. In the United States, KuCoin reached a settlement with the Department of Justice earlier this year, resulting in a payment of nearly $300 million as part of a plea deal concerning unlicensed operations in the country, agreeing to cease activities there.
As the cryptocurrency landscape continues to evolve, regulatory enforcement remains a critical focus for authorities worldwide. KuCoin’s case underscores the complexities and challenges exchanges face in adhering to evolving regulatory frameworks designed to curtail illicit financial activities.
The outcome of KuCoin’s appeal could have significant implications for its operational future, as the exchange navigates the intricate web of international regulations that govern cryptocurrency activities.
