NYDFS Secures $48.5 Million Settlement with Paxos for AML Deficiencies
The New York State Department of Financial Services (NYDFS) has reached a settlement of $48.5 million with Paxos Trust Company due to alleged anti-money laundering deficiencies in its partnership with Binance.
- Paxos was chartered as a limited purpose trust company by NYDFS in 2015.
- NYDFS claims Paxos failed to adequately monitor Binance's activities, leading to lax geofencing that allowed US users access to an unregulated exchange.
- Between 2017 and 2022, $1.6 billion in transactions involving illicit actors were processed.
- Binance allegedly handled transactions after US sanctions were imposed on certain entities.
- Paxos will pay a $26.5 million penalty and invest an additional $22 million to enhance its compliance program.
- A Paxos spokesperson stated that issues were identified over two and a half years ago and have since been remediated without affecting customer accounts.
Social media reactions include comments from former SEC chief of staff Amanda Fischer, who acknowledged the settlement and criticized Paxos’s previous risk management. This situation indicates ongoing scrutiny of cryptocurrency regulations in the US.