By PAUL O’DONOGHUE. Senior Correspondent
PAXFUL, a prominent crypto platform which recently closed down, has been fined $3.5 million for a series of major compliance failures.
FinCEN, the U.S. Treasury AML watchdog, said the company facilitated more than $500 million in suspicious activity involving “a host of illicit actors”.
“Paxful admits that it willfully violated the BSA (Bank Secrecy Act).,” it said. “The company enabled transactions with countries including Iran, North Korea, and Venezuela.
It also said the company allowed its to be used “to facilitate money laundering”.
FinCEN said Paxful’s failures included:
- Failing to file SARs (suspicious activity reports)
- Not developing or implementing an effective AML program
- Failing to register with FinCEN as an MSB (money services business)
Paxful was a peer-to-peer marketplace where people bought and sold Bitcoin. The company closed on November 1. It said this was due to the ‘impact of historic misconduct’ by former staff. It also cited “unsustainable operational costs from extensive compliance remediation efforts”.
Paxful failures
FinCEN said that the company’s former leadership team “ignored employees raising potentially suspicious or fraudulent transactions.
“When asked about what the platform would do to address such issues, then-senior leadership told staff they were working on [it],” it said.
“Yet even minimal transaction monitoring was not in place until at least 2018, more than three years after Paxful began operating.”
FinCEN said that Paxful did not have written transaction monitoring policies and internal controls in place before July 2019.
“As a result, all transactions conducted on Paxful, in fiat currency, CVC, or prepaid
access cards were not appropriately reviewed for potentially suspicious activity before then,” it said.
FinCEN Director Andrea Gacki said “for years, Paxful disregarded its BSA obligations.
“[It] facilitated transactions associated with illicit activity and high-risk jurisdictions, such as North Korea,” she said.
FinCEN added: “Paxful’s ineffective geo-spoofing controls failed to identify tens of millions of users that logged in to its trading platform with U.S. IP addresses.
“[This was] even though users were not located in the United States, including significant volumes of users from Nigeria and China.”
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