FinCEN Slaps Paxful with $3.5 Million Fine for Major AML Failures

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) has imposed a $3.5 million civil money penalty on the peer-to-peer Bitcoin marketplace Paxful. The fine is for willful violations of the Bank Secrecy Act (BSA), including the company's failure to register as a money services business (MSB), implement an effective anti-money laundering (AML) program, and file Suspicious Activity Reports (SARs).

According to FinCEN, Paxful's compliance failures allowed it to process over $500 million in suspicious cryptocurrency transactions. These transactions were linked to high-risk jurisdictions, including Iran, North Korea, and Venezuela, as well as criminal activity associated with the seized classifieds site Backpage.com.

"Paxful willfully violated the BSA by failing to register as an MSB, implement an effective AML program, and report suspicious transactions totaling more than $500 million," said Andrea Gacki, Director of FinCEN. The enforcement action was supported by several federal agencies, including the Justice Department and Homeland Security Investigations.

The consent order acknowledges that Paxful has since taken corrective steps, including firing senior leadership responsible for the violations and conducting an internal review. This case follows Paxful's shutdown in 2023, which co-founder and former CEO Ray Youssef attributed to mounting regulatory pressures, staff departures, and internal legal disputes. Youssef stated that dedicating a quarter of the company's workforce to compliance was insufficient to meet the burdensome U.S. regulatory demands.

This penalty underscores the increasing regulatory scrutiny on cryptocurrency platforms and sets a precedent for enforcement actions, signaling that firms must adapt their compliance controls to match the risks inherent in digital asset transactions.