KuCoin Faces Record CA$19.6 Million FINTRAC Penalty Over AML Failures

KuCoin is once again in the regulatory spotlight after Canada’s financial intelligence unit, FINTRAC, imposed a CA$19,552,000 penalty on its operating entity, Peken Global Limited. The size of the fine marks a historic first in Canada, representing one of the largest ever levied against a cryptocurrency exchange for anti-money laundering (AML) violations. The decision immediately drew global attention, as it demonstrated regulators’ willingness to pursue offshore trading platforms that serve Canadian clients without proper registration or compliance. By targeting KuCoin, FINTRAC not only penalized the exchange but also issued a broader warning to the digital asset sector worldwide: money laundering risks will not be tolerated, regardless of jurisdiction.

The fine, announced in mid-2025, was based on systemic breaches of Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations. Peken Global Limited, incorporated in Seychelles, operates KuCoin and was found to have violated three major compliance obligations. First, it failed to register as a foreign money services business (MSB), even though it directed crypto services at Canadian residents without any physical presence in the country. FINTRAC determined that registration was required and classified this as a “serious” violation under Canadian law. Second, the platform failed to report Large Virtual Currency Transactions on 2,952 occasions between June 1, 2021 and May 8, 2024, when single transactions equaled or exceeded CA$10,000. Although this was deemed “minor” when considered individually, the volume made it a significant breach of reporting requirements. Third, KuCoin neglected to file 33 suspicious transaction reports (STRs), despite having reasonable grounds to suspect money laundering or terrorist financing activity. These flows were linked to darknet marketplaces, mixing services, illicit chemical supply chains, and sanctioned counterparties. FINTRAC described this as a “very serious” violation, since the omission deprived authorities of critical intelligence.

Because of the repeated and large-scale nature of these failures, the penalty was unusually high. Peken is now appealing the decision to Canada’s Federal Court, claiming it should not be classified as a foreign MSB and that the penalty is disproportionate. KuCoin has publicly rejected the regulator’s findings, pledging to fight the sanction. The case, however, is already a milestone: it is the largest enforcement action ever taken by FINTRAC under its AML framework and signals a shift toward more aggressive crypto regulation in Canada.

The violations expose significant money laundering vulnerabilities. Operating unregistered meant FINTRAC lacked authority to audit or demand transparency from KuCoin, leaving Canadian clients free to transact without oversight. The failure to report nearly three thousand large transactions allowed high-value crypto flows to move without detection, undermining the monitoring system designed to flag such activity. Even more concerning were the 33 unreported suspicious flows tied to darknet markets, tumblers, and entities under international sanctions. Regulators warned that the omissions indicated either weak detection logic or disregard for escalation protocols. According to the penalty notice, some of the flagged transactions were linked to chemical supply firms designated for their role in synthetic drug production, further suggesting KuCoin facilitated flows connected to transnational crime. By failing to act, the exchange became part of the laundering chain rather than a neutral intermediary.

The Canadian enforcement is not an isolated incident in KuCoin’s history. In March 2024, U.S. prosecutors charged the exchange and its founders with conspiracy to operate an unlicensed money transmitting business and violations of the Bank Secrecy Act. The indictment alleged systemic failures: no adequate AML program, deficient customer identity verification, and missed suspicious activity reports. The U.S. government claimed KuCoin processed more than US$5 billion in suspicious funds. In January 2025, KuCoin pleaded guilty to operating an unlicensed money transmitting business, agreeing to pay nearly US$300 million in fines and forfeitures while exiting the U.S. market for at least two years. Its founders accepted deferred prosecution agreements and stepped down from their roles.

This came on the heels of a 2023 settlement with New York State regulators, in which KuCoin agreed to pay US$22 million in fines and refunds while barring New York residents from its platform. In Canada, Ontario regulators had previously banned KuCoin from capital markets and fined it for running an unregistered trading platform. Similar warnings were issued by Dutch regulators, and in the United Kingdom, KuCoin was placed on a watchlist for lacking local approval. U.S. filings further revealed that KuCoin internally knew of its compliance gaps but failed to make substantial reforms. In 2020, the exchange suffered a US$280 million hack, exposing weaknesses in its operational controls and further damaging trust.

Taken together, these episodes reveal a pattern: rapid international growth, regulatory evasion, and repeated deficiencies in AML systems. FINTRAC’s penalty is simply the latest chapter in a series of global enforcement actions against KuCoin.

The implications extend well beyond one platform. The case illustrates that regulators will hold offshore actors accountable if they target domestic clients, erasing the idea that distance provides immunity. It underscores that AML compliance must be embedded in the design of crypto exchanges, through real-time monitoring, blockchain analytics, wallet risk scoring, and robust KYC protocols. The scale of the CA$19.6 million penalty also signals a trend toward tougher enforcement, with higher fines for systemic breaches. At the same time, it highlights the need for greater international coordination, as money laundering networks cross jurisdictions and digital chains. Regulators increasingly stress that even firms appealing penalties must remediate their compliance systems, since contesting fines does not erase reputational damage or reduce the need for corrective action.

KuCoin’s appeal of FINTRAC’s decision is being closely monitored across the financial sector. The exchange is seeking relief by challenging both the classification of its operations and the magnitude of the fine. The outcome may set a precedent for how far Canadian jurisdiction extends over foreign crypto exchanges serving Canadian users. But regardless of the legal arguments, the reputational risk remains, as KuCoin’s record of compliance failures continues to draw scrutiny worldwide. Even if the court reduces or overturns the fine, the case has already reaffirmed a principle: no cryptocurrency platform can treat AML compliance as optional. For KuCoin, the decision to fight the penalty is not just a legal dispute but also a test of its long-term credibility with regulators, clients, and the wider financial ecosystem.

By fLEXI tEAM