Paxos has agreed to pay $48.5 million to the New York Department of Financial Services (NYDFS) to resolve allegations related to inadequate due diligence with Binance and failures in its anti-money laundering program.
Paxos' Lack of Oversight
According to the NYDFS, Paxos failed to maintain appropriate oversight over its former partner Binance, resulting in significant issues in anti-money laundering compliance. The settlement includes a $26.5 million fine and $22 million to be invested in compliance initiatives.
Compliance Issues
Regulators highlighted that Paxos' compliance programs lacked proper mechanisms for timely investigations and detection of illicit activities. Notably, deficiencies in its Know Your Customer (KYC) procedures allowed malicious actors to open multiple accounts.
Paxos' Response and Next Steps
Paxos stated that all previously identified issues have been resolved and did not affect customer accounts. The company continues to operate with other regulated stablecoins such as Pax Dollar (USDP) and PayPal USD (PYUSD).
The settlement highlights the importance of maintaining compliance and effective oversight in partnerships within the cryptocurrency market.
