(CMR) The US Justice Department has indicted KuCoin, a prominent global cryptocurrency exchange company that has associates registered in the Cayman Islands, for Bank Secrecy Act (BSA) and unlicensed money transmission offenses.
The indictment, filed in New York, accuses KuCoin, its founders Chun Gan and Ke Tang, and associated entities registered in the Cayman Islands, the Republic of Seychelles, and Singapore of willfully failing to implement an anti-money laundering (AML) program that complied with the stringent AML and Know Your Customer (KYC) protocols mandated by the BSA, a criminal offense under US federal law.
The lack of these critical compliance measures allegedly facilitated the laundering of over $5.39 billion, potentially linked to a spectrum of criminal activities, including sanctions evasion and cybercrime, according to international firm Orrick.
Orrick explained that central to the charges is the applicability of the BSA to non-U.S. entities engaging in money transmission services with US residents. That includes a wide array of cryptocurrency activities, such as the issuance and exchange of cryptocurrency occurring “in substantial part” in the United States. The BSA requires such entities to implement policies, procedures, and internal controls designed to identify and report potential money laundering to FinCEN and mitigate risks associated with money laundering and terrorist financing.
In many instances, the BSA also requires such entities to obtain and verify customers' personal information and register with FinCEN, triggering government examinations for compliance with the BSA.
The indictment follows similar enforcement actions against other large cryptocurrency exchanges, such as BitMex in 2020 and Binance in 2023. It emphasizes the United States' stance on enforcing its financial regulations, particularly the BSA, on actors that knowingly offer financial services involving cryptocurrency to US residents.
According to Orrick, the case highlights the importance of registering with the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury, implementing programs to comply with the BSA and ensuring accurate disclosures, among other things.
KuCoin is accused of systematically circumventing these legal requirements despite having a substantial user base in the United States. According to the indictment, from November 2022 through March 2023, KuCoin knowingly permitted U.S.-based customers to open multiple accounts and conduct trades, including spot and futures trades with margin, without requiring any personal identifying information or documents.
KuCoin is further accused of knowingly continuing to serve US residents after implementing a new AML program in July 2023 and purporting to block US residents.
Prosecutors are seeking forfeiture of all properties associated with the alleged offenses.
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