KuCoin Hit with CA$19.6M FINTRAC Penalty as AML Failures Haunt Exchange

KuCoin has once again landed in regulatory crosshairs after Canada’s financial intelligence unit, FINTRAC, imposed a record-breaking CA$19,552,000 penalty on its operating entity, Peken Global Limited.

The fine, issued in mid-2025, is historic in the Canadian context, ranking among the largest ever levied on a cryptocurrency exchange for anti-money laundering breaches.

The case immediately reverberated internationally, with observers noting that the move showed regulators are increasingly prepared to target offshore exchanges serving Canadian clients without meeting registration or compliance requirements. By sanctioning KuCoin, FINTRAC delivered a clear message not just to the exchange itself but to the wider digital asset sector: “money laundering risks will not be tolerated, regardless of the jurisdiction in which a firm is incorporated.”

FINTRAC’s Case Against KuCoin

The CA$19.6 million administrative monetary penalty against Peken Global Limited stemmed from systemic breaches of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations. FINTRAC outlined three major violations:

1. Failure to register as a foreign MSB

   Peken, a Seychelles-based entity, met the definition of a foreign money services business (MSB) because it lacked a physical presence in Canada yet directed crypto services at Canadian residents. FINTRAC stated that “because it never completed registration despite being given an opportunity, it violated the registration requirement.” The lapse was classified as a “serious” violation under Canadian law.

   
   

2. Failure to report large virtual currency transactions

   Between June 1, 2021, and May 8, 2024, KuCoin failed to file reports for 2,952 transactions of CA$10,000 or more. These Large Virtual Currency Transaction Reports are required to maintain transparency and aid intelligence gathering. FINTRAC deemed this a “minor” violation individually, though the scale of unreported activity made it highly significant.

   
   

3. Failure to file suspicious transaction reports (STRs)

   In 33 cases, KuCoin neglected to submit suspicious transaction reports, despite what FINTRAC said were “reasonable grounds to suspect money laundering or terrorist financing.” These flows involved darknet marketplaces, mixing services, illicit chemical supply chains, and sanctioned counterparties. Because these red flags went unreported, the agency categorized this lapse as “very serious.”

Given the repeated and large-scale nature of the violations, FINTRAC issued one of its largest penalties to date. Peken has appealed the decision in Canada’s Federal Court, arguing that it should not be treated as a foreign MSB under Canadian rules and insisting that the penalty is excessive. KuCoin itself declared it “strongly disagrees” with the enforcement action and intends to contest it.

Why the Violations Matter

The violations spotlight how weak controls can open doors for illicit activity:

• Unregistered operations left FINTRAC powerless to oversee or audit KuCoin’s Canadian dealings, allowing domestic users to transact without scrutiny.

• Missed large transaction reports concealed nearly three thousand high-value crypto transfers, effectively letting criminal actors shift value in and out of the country invisibly.

• The 33 unreported STRs hid some of the most critical red flags, including wallets tied to darknet markets, mixers, and entities already flagged by regulators. FINTRAC described this omission as particularly damaging, since it deprived authorities of “key intelligence.”

• Cross-border laundering was facilitated, with the enforcement notice citing links to chemical suppliers designated for synthetic drug production, as well as ransomware, theft, and fraud.

• Structuring and layering of illicit funds went unchecked, as criminals were able to fragment transactions, hop across wallets and chains, or use mixing tools without triggering alerts.

Together, these gaps reflected systemic failures in both customer due diligence and transaction surveillance.

KuCoin’s AML and Regulatory Legacy

The Canadian action is only the latest chapter in KuCoin’s troubled compliance record. Over the past several years, the exchange has faced mounting scrutiny worldwide:

• U.S. federal charges and plea (2024–2025): In March 2024, American prosecutors indicted KuCoin and its founders for operating an unlicensed money transmitting business and violating the Bank Secrecy Act. Authorities accused the platform of ignoring AML rules, failing to verify customers, and not filing suspicious activity reports. The indictment claimed KuCoin processed over US$5 billion in suspicious inflows and US$4 billion in outflows. By January 2025, KuCoin pleaded guilty to operating without a license, agreeing to pay nearly US$300 million in penalties and to exit the U.S. market for at least two years. Its founders struck deferred prosecution deals and stepped down from company leadership.

• Settlement with New York (2023): Before the federal plea, KuCoin paid US$22 million in fines and refunds to settle allegations with New York regulators. The deal required the platform to bar local users and addressed claims it had misrepresented itself while operating without registration as a broker-dealer.

• Warnings and bans elsewhere: Ontario regulators banned KuCoin from local capital markets and fined it for operating unregistered. Similar alerts were issued in the Netherlands and the U.K., where it appeared on regulatory watchlists.

• Systemic deficiencies revealed in court: U.S. filings exposed KuCoin’s lack of BSA-compliant KYC/AML protocols, despite knowingly serving American customers. Even internal warnings in 2022 about compliance gaps led to only superficial fixes.

• Security incidents: In 2020, KuCoin suffered a US$280 million hack, with losses traced to hot wallet vulnerabilities. While unrelated to AML directly, the breach underscored weak controls within the platform.

• Offshore-first model: KuCoin’s longstanding strategy of operating through offshore entities without local registrations allowed fast growth but increasingly drew enforcement actions in heavily regulated jurisdictions.

Collectively, KuCoin’s record paints a picture of “aggressive expansion, frequent regulatory conflict, and persistent AML shortcomings.”

Wider Lessons for Crypto and AML

The FINTRAC penalty carries broader implications for digital asset governance:

• “Geographic distance is not immunity.” Offshore status cannot shield firms serving local clients from registration and oversight.

• “Compliance must be built into platform architecture,” including real-time monitoring, blockchain analytics, KYC systems, and escalation protocols.

• Regulators are escalating enforcement, with larger fines for systemic breaches.

• Cross-border collaboration is essential, since money laundering flows routinely move across chains and jurisdictions.

• Appeals do not excuse the need for remediation. Firms must strengthen controls even while challenging enforcement actions.

• Trust, reputation, and market access now depend directly on AML credibility.

KuCoin’s Appeal

The CA$19.6 million sanction is not yet final, with KuCoin’s operator appealing to Canada’s Federal Court. The exchange has made clear it will contest both “the regulator’s interpretation of its obligations” and “the scale of the fine.”

Industry watchers say the case could help define how far Canadian jurisdiction extends over foreign crypto businesses. But regardless of the outcome, the reputational damage is already substantial.

As one compliance analyst put it, “contesting a penalty does not erase the reputational risk or the urgent need for remediation.” Even if the court reduces or overturns the fine, KuCoin must still prove it is willing to meet global AML expectations.

The appeal, then, is not only a legal fight but also a test of KuCoin’s long-term commitment to rebuilding trust with regulators, clients, and the broader financial ecosystem. 

By fLEXI tEAM