In a significant regulatory shift, emerging financial sectors, specifically cryptocurrency and digital payments companies, faced fines totaling $5.8 billion for compliance lapses in 2023. According to a report from Financial Times, this marks the first time that fines against crypto and digital payments firms surpassed those against traditional financial institutions. Traditional financial services firms paid fines amounting to $835 million in 2023, the lowest level in a decade.
The fines in the cryptocurrency and fintech sector included a landmark $4.3 billion penalty imposed on cryptocurrency exchange Binance by US prosecutors, signaling increased scrutiny and underscoring the need for robust compliance measures within the industry.
Dennis Kelleher, CEO of Better Markets, attributed the figures more to bad practices in newer financial sectors than to improvements in traditional banks. The data, compiled by compliance software provider Fenergo, indicated that total fines for money laundering and financial crime violations exceeded $6.6 billion, a 30% increase. However, this figure remained below the 2015 peak of $11.3 billion.
The number of fines against crypto and payment providers surged significantly in 2023, with crypto firms receiving 11 fines, compared to an average of fewer than two per year in the previous five years. Payment firms faced 27 fines, surpassing their average of about five per year from 2018 to 2022. The lack of consistent global regulation for crypto firms raises concerns about further fines, according to David Lewis, former head of the Financial Action Task Force.
Regulators in various jurisdictions have urged payments firms to enhance compliance. Charles Kerrigan, a crypto specialist and partner at law firm CMS, anticipates that fines against crypto and payments groups could decrease in the coming years as the industry matures and regulatory oversight increases. However, Rory Doyle, head of financial crime policy at Fenergo, suggests that fines against traditional financial institutions might rise again, particularly concerning dealings with Russian entities.