Cryptocurrency exchange hit with €1 million fine by FIAU

A cryptocurrency exchange has been hit with a €1 million fine for anti-money laundering breaches found during an FIAU inspection in 2023.

In a public notice, the FIAU, Malta’s anti-money laundering watchdog, said OKCoin Europe had failed to properly scrutinise $20 million (€18 million) worth of transactions found in 80% of the customer files reviewed.

OKCoin Europe is licensed as a virtual asset provider, meaning it can facilitate trading of virtual assets like cryptocurrencies.

The FIAU inspection found the company also failed to properly identify the money-laundering risks from its product offering and did not carry out a risk assessment upon establishing a business relationship for around half of the customer files reviewed as part of the compliance examination.

It, however, commended OKCoin for the “significant improvement” undertaken in the past 18 months to remedy issues found during the examination.

Among the past anomalies flagged by the FIAU were unexplained or high spikes in deposits over a short period of time and sudden surges in activity by certain clients after a period of dormancy.

In one example, an OKCoin client made cryptocurrency deposits of $1.8 million in the space of four months in 2021, having only deposited $50,000 in the previous two years.

At the time of these high-value deposits, the transactions were not being scrutinised by the company, save for one instance.

The client’s account was frozen more than a year later after a more thorough review.

Moreover, in a small number of cases, identity verification documents, such as identity cards and passports, were discovered to have been expired for as long as two years, meaning that OKCoin had not taken the necessary steps to re-obtain up-to-date and valid documents from these clients.

OKCoin: We have been proactive

A spokesperson for OKCoin, which is being rebranded to OKX, told Times of Malta that the FIAU review identified historical gaps in the company’s compliance framework. The spokesperson said the company took the opportunity to proactively enhance its internal processes and strengthen its anti-money laundering controls.

“Over the past two years, we have implemented a comprehensive compliance programme, including technology upgrades, enhanced monitoring, and robust remediation efforts. The FIAU’s final compliance review report acknowledged our significant improvements and commitment to compliance… With this chapter behind us, OKX remains focused on the future—continuing to build a secure, transparent, and compliant platform for our users worldwide,” the spokesperson said.

Last year, OKCoin also found itself on the MFSA’s radar over regulatory failings.

The MFSA agreed to settle the matter after the company demonstrated “goodwill”. As part of the settlement, OKCoin agreed to pay an administrative penalty of €304,000.

The MFSA and OKCoin also agreed on a number of measures, including the appointment of an independent third-party service provider, to review the adequacy of the company’s governance arrangements.

In November, a constitutional court overturned a ruling that effectively crippled the FIAU's ability to issue fines like the one levied against OKCoin.