Financial Crimes Enforcement Network assesses USD 3.5 million penalty on Paxful for willful Bank Secrecy Act violations tied to over USD 500 million in suspicious activity

The Department of the Treasury’s Financial Crimes Enforcement Network assessed a USD 3.5 million civil money penalty against Paxful, Inc. and Paxful USA, Inc., finding willful violations of the Bank Secrecy Act by the peer-to-peer convertible virtual currency trading platform. FinCEN concluded Paxful facilitated more than USD 500 million in suspicious activity, including transactions involving Iran, North Korea, and Venezuela and activity linked to Backpage.com, which the Department of Justice seized in 2018. Paxful admitted it failed to register with FinCEN as a money services business, develop and maintain an effective anti-money laundering programme, and file suspicious activity reports. FinCEN cited mitigating steps including changes in leadership and remediation work to identify and report previously unreported suspicious activity, and noted coordination with the Department of Justice and Homeland Security Investigations. FinCEN also used the action to reiterate compliance expectations for money transmission and virtual asset and prepaid access activity, including risk-based AML controls, customer identity verification processes, and the use of tools such as IP address and geolocation data to mitigate exposure to high-risk jurisdictions and prohibited parties, with further details set out in the Consent Order.