Crypto Exchange OKX Fined $1.2 Million For Anti-Money Laundering Violations

Popular crypto exchange OKX has been fined $1.16 million (€1.054 million) in Malta for breaching certain anti-money laundering regulations. This development follows a string of operational and regulatory controversies surrounding the Seychelles-based exchange.

OKX Penalized For Failed 2023 Compliance Test

In a recent report by Bloomberg, the Maltese Financial Intelligence Analysis Unit (FIAU) imposed a million-dollar fine on OKX Europe Limited after results of a 2023 compliance test revealed several failures in the exchange’s anti-money laundering system. According to a statement by FIAU, the OKX subsidiary conducted a Business Risk Assessment (BRA) to identify potential threats and vulnerabilities its operation faces. However, the Maltese regulator discovered multiple deficiencies in the BRA programming which altered responses to perceived risks of money laundering (ML) and financing terrorism (FT). One of these deficiencies included OKX’s failure to evaluate all ML/FT risks associated with its product offerings. While the exchange was not required to assess the criminal tendencies of each coin on its platform, it was required to classify these tokens and examine the ML/FT  risks of specific types of coins and product features. In addition to the BRA results, FIAU also uncovered other deficiencies in OKX’s operations including its Customer Risk Assessment (CRA) which evaluated the ML/FT risks associated with customers both as individuals and legal entities. The Maltese regulator discovered that OKX had failed to conduct a CRA before onboarding about half of its customer base. A statement read:

Moreover, the Company was found to have failed to carry out a CRA upon establishing a business relationship for around 50% of the customer files reviewed as part of the compliance examination. Despite the Company’s submissions that a CRA was conducted at onboarding for these customers, the evidence collected indicates that such clients had deposited thousands of dollars before a CRA was completed, with such assessment being conducted several months following onboarding.

Following these violations, FIAU has handed down an administrative fine of €1.054 million to OKX alongside other directives. However, the Maltese authority notes that OKX has significantly enhanced its regulatory and operational compliance over the past 18 months with significant improvements to its “BRA and CRA methodologies, customer profiling processes, and transaction monitoring framework.”

OKX Woes Persist

Aside from its recent debacle in Malta, OKX has made headlines on alleged regulatory and operational incompetence. In February, OKX was issued a massive fine of $504 million by US authorities for processing over $1 million in unlicensed US transactions. In March, Bloomberg reported that European authorities were reportedly examining the Seychelles-based exchange over the use of its platform in laundering some proceeds ($100 million) of the $1.5 billion Bybit hack. OKX refuted all claims of its participation in this crime stating its commitment to help Bybit by blocking the hackers from its trading platforms or wallet services.