Australia’s financial crime watchdog has raised significant issues regarding the local operations of a major cryptocurrency exchange’s adherence to anti-money laundering and counter-terrorism financing regulations. The agency has mandated the exchange to bring in an external auditor, giving them a 28-day timeframe to propose candidates for this role.
Concerns from the agency stemmed from several factors, particularly noting that an independent review recently conducted by the exchange did not adequately reflect the scale, range of services, and associated risks of the business. Additional worries were raised over the exchange’s high level of staff turnover, insufficient local resources, and inadequate oversight from senior management, which questioned the effectiveness of its governance related to AML and CTF regulations.
An official from the agency underscored that while large international firms might seem well-equipped to navigate complex regulatory landscapes, they may fail if they do not grasp the specific risks related to money laundering and financing of terrorism pertinent to local markets. This indicates a need for such firms to closely align their operational frameworks with local regulations, rather than expecting local regulations to adjust to their standard processes.
The exchange in question is recognized as the largest in the world based on trading volume and operates in Australia under a local entity. Notably, it is required to follow local regulations concerning digital currency exchanges. The agency emphasized that while businesses can deploy systems across different jurisdictions, those systems must be tailored to meet local regulatory needs.
Further, a reminder was issued regarding the necessity for adequate reporting by entities operating in high-risk sectors and dealing with substantial transaction volumes. With the acknowledgement of the global nature of the cryptocurrency market, the agency expects strong measures for customer identity verification, thorough due diligence, and effective monitoring of transactions.
The agency called upon all digital currency exchanges to stay vigilant in detecting suspicious activities that could indicate potential risks, such as money laundering through scams, cybercrime, and funding for terrorism, stressing that these risks are magnified within the context of global exchanges.
The exchange’s activities in Australia have faced scrutiny in the past as well. Recently, the Australian Securities and Investments Commission initiated legal action against its local derivatives operations. The lawsuit alleges that the exchange misclassified a significant number of retail investors as wholesale clients, which resulted in those investors being deprived of important consumer protections.
Overall, this situation highlights the pressing challenges that international cryptocurrency companies encounter when operating within regulatory frameworks, reinforcing the critical need for robust compliance mechanisms tailored to local laws.