KuCoin’s Latest CAD 19M Penalty from FINTRAC and Its AML Legacy

kucoin fintrac penalty aml money laundering

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KuCoin made headlines again when Canada’s financial intelligence unit, FINTRAC, announced a CA$19,552,000 penalty against its operating arm, Peken Global Limited. The size of the sanction is historic in the Canadian context, representing one of the largest financial penalties ever imposed on a cryptocurrency exchange for anti-money laundering violations. The case immediately drew international attention because it highlighted how regulators are no longer hesitating to pursue offshore platforms that serve domestic clients without respecting registration or compliance requirements. By targeting KuCoin, FINTRAC not only sent a message to the exchange itself but also issued a broader warning to the global digital asset sector: money laundering risks will not be tolerated, regardless of the jurisdiction in which a firm is incorporated.

The Canadian Penalty: Why FINTRAC Acted

Peken Global Limited, a Seychelles-incorporated entity operating as KuCoin, was hit with a CA$19,552,000 administrative monetary penalty by FINTRAC in mid-2025. The action was rooted in systemic failures of compliance under the Canadian Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations.

Three core violations formed the basis of the penalty:

Failure to register as a foreign money services business (MSB)
FINTRAC determined that Peken met the criteria of a foreign MSB: it had no physical presence in Canada but directed crypto services at Canadian residents. Because it never completed registration despite being given an opportunity, it violated the registration requirement. This was classified as a “serious” violation under Canadian law.
Failure to report large virtual currency transactions
Over the period from June 1, 2021 to May 8, 2024, the crypto platform failed to submit Large Virtual Currency Transaction Reports on 2,952 occasions where a single transaction reached or exceeded CA$10,000. Such reporting is mandated for transparency and intelligence gathering. This violation was deemed “minor” in Canadian regulatory terms (in that it is less grave in isolation) but still significant in aggregate.
Failure to file suspicious transaction reports (STRs)
In 33 instances, the platform neglected to report transactions for which it should have had reasonable grounds to suspect money laundering or terrorist financing. FINTRAC flagged flows tied to darknet marketplaces, mixing services, illicit chemical supply chains, and counterparties designated for sanctions exposure. Because failure to report such cases deprives authorities of key intelligence, this violation was classified as “very serious.”

Because these violations occurred repeatedly and at scale, the resulting penalty was unusually large. Peken is appealing the decision to Canada’s Federal Court, arguing that it should not be considered a foreign MSB under Canadian law, and that the penalty is excessive. KuCoin has publicly stated its strong disagreement and intention to contest the enforcement.

This is the largest penalty ever levied by FINTRAC under its AML regime. It reflects a shift toward more aggressive enforcement in the crypto sector.

Anatomy of the Violations: What They Reveal About Money Laundering Risks

To understand the money laundering dimension, it helps to see how these violations facilitate illicit flows:

Unregistered status means minimal oversight
Without registration, FINTRAC lacked authority to supervise, audit, or demand transparency from KuCoin’s Canadian operations. That gap allowed users in Canada to transact unmonitored.
Missed large transaction reporting masks high-value flows
Over nearly three thousand unreported large transactions, illicit actors could import or export value in crypto form without triggering regulatory alerts. That essentially conceals layers of funds movement from the oversight net.
STR omissions leave red flags unreported
The fact that 33 flows with indicators of illicit risk passed unreported is alarming. Many such flows involved wallet addresses connected to darknet markets, mixing and tumblers, or counterparties already under regulatory or law enforcement scrutiny. The omission illustrates weak internal detection logic or disregard for escalation protocols.
Cross-border laundering and linkages to illicit trade
The penalty notice describes linkages to chemical supply firms designated under sanctions for synthetic drug production, as well as darknet marketplaces, ransomware, theft, and fraud. This suggests that KuCoin may have facilitated movements of funds tied to transnational crime, making it part of the chain rather than a passive conduit.
Structuring, layering, and mixing in crypto form
Criminals often break down large sums into multiple smaller payments to avoid thresholds or detection (structuring). They might chain through intermediate wallet addresses, cross blockchains, or use mixing services. Because KuCoin failed to report or flag these flows, much of that layering could occur unchallenged.

Taken together, the violations indicate systemic gaps both in front-end customer controls and back-end transaction surveillance.

KuCoin’s Regulatory and AML Track Record

The 2025 Canadian penalty is not an isolated event. KuCoin has faced regulatory and legal challenges over several years, many involving AML, compliance, and operational licensing issues. Below is a summary of the more notable episodes:

U.S. Indictment and Enforcement (2024 / 2025 plea)
In March 2024, U.S. federal prosecutors charged KuCoin and its founders with conspiracy to operate an unlicensed money transmitting business and violations of the Bank Secrecy Act. The indictment alleged that KuCoin failed to maintain an adequate AML program, neglected customer identity verification, and failed to file suspicious activity reports. The platform was accused of serving U.S. users covertly while claiming it did not. The complaint asserted that KuCoin had received over US$5 billion and sent over US$4 billion in suspicious funds. In January 2025, KuCoin pleaded guilty to operating an unlicensed money transmitting business in U.S. courts. As part of the resolution, it agreed to pay nearly US$300 million in fines and forfeitures, and to exit U.S. market operations for at least two years. Its founders entered deferred prosecution agreements and relinquished roles in the company.
New York settlement (2023)
Prior to the federal criminal process, KuCoin settled with New York State regulators. It agreed to pay US$22 million in fines and refunds and block New York users from its platform. The settlement addressed allegations that KuCoin operated without registration as a securities and commodities broker-dealer and misrepresented itself.
Warnings and bans in Canada and other jurisdictions
In Ontario, Canada, regulatory authorities once banned KuCoin from capital markets and imposed a modest administrative penalty after finding it operated an unregistered crypto trading platform. Similar warnings emerged from authorities in the Netherlands, stating that KuCoin operated without registration under local AML law for exchange and exchange-fiat services. In the U.K., KuCoin was placed on a warning list for lacking regulatory approval.
Systemic deficiencies and internal audits
In U.S. court filings, it was revealed that KuCoin internally failed to implement BSA-compliant KYC/AML procedures even though it was aware of its U.S. user base. A customer in 2022 raised regulatory concerns internally, noting various compliance shortcomings. The platform’s response was token adjustment rather than deep remediation.
Security and reputation incidents
While not strictly AML, KuCoin suffered a major hack in 2020, losing over US$280 million in assets. The exposure of private keys from hot wallets compromised trust and highlighted operational risk. While the hack was not in itself a money laundering case, it shows the general control environment of the platform.
Domestic registration debate and market strategy
KuCoin long operated with an offshore structure and minimal on-the-ground regulatory registration. That approach allowed it to target multiple jurisdictions without fully embracing local compliance regimes. Over time, that strategy has drawn enforcement attention, especially in heavily regulated markets.

Taken holistically, KuCoin’s track record demonstrates a pattern: aggressive growth, customer acquisition often straddling regulatory boundaries, and repeated failure or delay in embedding robust AML controls. The Canadian penalty is one of the latest corrective steps from global regulators trying to rein in this approach.

Broader Implications for AML and Crypto Governance

The KuCoin case, particularly the FINTRAC enforcement, carries several lessons and signals:

Regulators will hold offshore actors accountable
Geographic distance is not immunity. If a crypto platform serves residents in a jurisdiction, it may be subject to registration, oversight, and enforcement in that jurisdiction.
Crypto exchanges must embed AML by design, not as afterthought
Compliance must be built into platform architecture: real-time monitoring, blockchain analytics, wallet risk scoring, trigger thresholds, anomaly detection, and robust KYC systems. Patchwork fixes are insufficient.
Enforcement is trending harder, with higher penalties
The magnitude of this CA$19.6 million penalty suggests regulators are escalating. The aggregation of multiple violations, including multiple missed reports and suspicious flows, will increasingly attract large fines.
Global regulatory alignment is increasingly necessary
Criminal flows span jurisdictions and chains. Information sharing, standardized AML expectations, and cross-FIU collaboration are essential to catch and interrupt laundering that hops across borders.
Appeals don’t protect from remediation pressure
Even where firms legally contest penalties, regulatory expectations demand swift remediation. Firms must act to correct deficiencies while litigation unfolds.
Reputation and business viability depend on compliance credibility
Public notices of enforcement damage brand trust. Future partnerships, banking access, licensing, and user acquisition can suffer if a platform is branded high risk.
Precedent setting for crypto AML enforcement
The KuCoin case will likely become a benchmark in AML and virtual assets. It sets clearer expectations for platforms on what behavior is unacceptable and what thresholds regulators are willing to enforce.

KuCoin’s Appeal of the FINTRAC Penalty

The CA$19.6 million penalty imposed by FINTRAC on KuCoin’s operator is not the end of the story. KuCoin has formally appealed the decision to Canada’s Federal Court, signaling that the exchange intends to contest both the regulator’s interpretation of its obligations and the scale of the fine. By appealing, KuCoin is not only seeking relief from a record sanction but also testing the boundaries of how far Canadian jurisdiction extends over foreign cryptocurrency platforms serving domestic users.

The outcome of this appeal will be closely watched across the financial sector, as it may clarify the responsibilities of offshore virtual asset providers and the extent of FINTRAC’s authority. Regardless of the legal arguments, the case underlines a key principle: contesting a penalty does not erase the reputational risk or the urgent need for remediation. KuCoin’s history of compliance failures has already drawn scrutiny worldwide, and its challenge to FINTRAC may prolong rather than resolve regulatory uncertainty.

Whether the court upholds or reduces the penalty, the case reinforces that no crypto exchange can afford to treat AML compliance as optional. Appeals may shape precedent, but they cannot substitute for building proactive, robust systems that meet evolving global standards. KuCoin’s decision to fight the penalty is therefore both a legal battle and a test of its long-term commitment to rebuilding trust with regulators, clients, and the broader financial ecosystem.

Source: FINTRAC

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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KuCoin’s Latest CAD 19M Penalty from FINTRAC and Its AML Legacy