With NYDFS, Paxos settles for $ 48 million above Binance and AML violations

Paxos has agreed to pay $ 48.5 million to the New York Department of Financial Services (NYDFS).

This is to resolve allegations with regard to insufficient due diligence about his former partner, binance and failures in his anti-money laundering program.

NYDFS -SWENMOS PAXOS Mist Missing Supervision

According to a press release of 7 August, the conditions of the settlement require The Stablecoin emittent pays a fine of $ 26.5 million and invests $ 22 million in his compliance program. Paxos previously gave the Binance USD (BUSD) Stablecoin until 2023, when the NYDFs ordered to stop the poor Geofening and Sanctions of the stock market. According to the regulator, the action was the “first orderly outcome of a stablecoin.”

“Regulated entities must maintain appropriate risk management frameworks that correspond to their business risks, including relationships with business partners and external suppliers,” said Chief Inspector Adrienne A. Harris.

Paxos, in 2015 with a license such as a limited trust company, was authorized to operate in the virtual currency room. Later it entered into a partnership with Binance to spend Bud, bring it to the market and distribute.

As part of its legal obligations, the company had to regularly conduct due diligence on Binance. However, the New York financial watchdog discovered that it had no correct checks to check for serious illegal activities on or through the exchange. It also failed to escalate red flags to his senior management and administration.

An important problem was Binance’s ‘lax geofencing’, so that users in the US have access to the stock market without a permit. An overview of historical transactions between 2017 and 2022, aimed at selected digital assets, revealed that around $ 1.6 billion that was moved through it was linked to criminal activities. The investigation also showed that the platform had processed payments with entities that were already punished by the US Office of Foreign Assets Control (OFAC).

Compliance issues

In addition to his shortcomings with Binance, the New York Regulator also discovered that Paxos had kept a weak compliance program for years. The company knows your customer (KYC) procedures are described as ‘non -advanced’, so that users with shared addresses, overlapping documents and suspicious behavior can become suspicious behavior to open multiple accounts.

The poor transaction strike system could also not catch clear signs of money laundering. Authorities noted that the company had no clear rules for starting investigations after receiving law enforcement requests, which further delayed the detection of illegal activity on the platform.

Paxos has since moved to rebrand himself as a compliance-oriented blockchain infrastructure provider. The company stated that the identified problems were historical, completely resolved and had no influence on customer accounts. It continues to operate other regulated stablecoins, including Pax Dollar (USDP) and PayPal USD (Pyusd).