New York Ministry Inspector, Adrienne A. Harris, announced today that Paxos Trust Company will pay a penalty of $ 26.5 million in the New York State for failing to carry out a sufficient custody of its former partner, Paxos.
In addition to the sentence, Paxos agreed to invest an additional $ 22 million to improve his compliance program and to restore shortages according to a plan approved by DFS.
Paxos to chartered as a limited confidence company and to be authorized to participate in virtual currencies from the section in 2015 and later formed a relationship with Binance in the market and distribution of Binance USD (“Busd”) Stablecoin. Under the terms of his agreement with the department, Paxos was obliged to perform a regular diligence of Binance.
The department’s survey revealed that Paxos did not have appropriate checks for effective monitoring for significant illegal activity in or through Binance and failed to scale red flags in the Paxos Senior Administration and its Council. Specifically, Binance’s Geofencing restrictions have allowed US users to access an unjust exchange.
A review of Binance historical transactions between 2017 and 2022, in a selected set of virtual currency assets, concluded that $ 1.6 billion in transactions falling to or from the Binance platform involving illegal bodies and found that Binance had been processed by the US offices of their foreign assets.
In February 2023, the DFS was the world’s first regulator to address the security and health concerns associated with Binance, ordering that Paxos trusts Paxos’s fatigue issued by Paxos and supervised the first neat hearing of a Stablecoin.
After the DFS took this supervisory action, federal and foreign regulatory authorities quickly followed in the steps of DFS.
In addition to Paxos’ failures related to Binance, the department’s research revealed that Paxos has been exploiting an inadequate compliance program for years. As a result of its undefined that your customers/customer care program, customers who share addresses, corporate documents, beneficial owners and certain attributes of the possible unlawful coordinated activity were able to open multiple accounts and remain unnecessary.
The PAXOS transactions monitoring system also prevented the company from detecting obvious patterns of money laundering, thereby exacerbating the deficiencies with embarkation. In addition, Paxos did not have specified instructions on when investigations should be opened after receiving law enforcement.
This deficiency prevented the company from finding the bad actors more easily on its platform.