Paxos agrees to pay a $26.5 million fine and invest $22 million in compliance upgrades after New York regulators cited anti-money laundering shortcomings in its Binance BUSD partnership.
Highlights
Significant Financial Penalty: Paxos agreed to a $48.5 million settlement with the New York Department of Financial Services, comprising a $26.5 million fine and a $22 million investment toward improving its AML and compliance infrastructure.
Due Diligence Failures: Regulators found Paxos failed to properly vet Binance between 2017 and 2022, during which approximately $1.6 billion in illicit transactions occurred via the BUSD stablecoin.
Regulatory Warning Signal: NYDFS emphasized that regulated entities must maintain robust risk frameworks and oversight, especially regarding third-party partnerships and AML controls.
Summary
Paxos has entered into a $48.5 million settlement with the New York Department of Financial Services (NYDFS) following findings of serious anti-money laundering (AML) deficiencies related to its partnership with Binance and its issuance of the Binance USD (BUSD) stablecoin. The resolution includes a $26.5 million civil fine and a further $22 million investment aimed at bolstering Paxos’s compliance systems.
NYDFS flagged that Paxos had failed to conduct adequate due diligence and transaction monitoring—especially between 2017 and 2022—allowing up to $1.6 billion in potentially illicit flows through its platform due to insufficient KYC/CDD protocols.
This settlement serves as a critical reminder that financial institutions must align their risk management systems with their business exposures—particularly when partnering with external entities. NYDFS underscored the importance of vigilant vendor oversight in safeguarding financial integrity.
