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Paxos Fined $48.5M for AML Failures Linked to Binance

Anti Money Laundering

Business Honor - Paxos Fined $48.5M for AML Failures

Business Honor
08 August, 2025

Paxos fined $48.5M by NYDFS over AML failures tied to Binance partnership, boosting compliance.

New York State's Department of Financial Services (NYDFS) has obtained a $48.5 million settlement with blockchain infrastructure company Paxos, identifying extensive anti-money laundering (AML) failures related to its business relationship with cryptocurrency exchange Binance. According to the settlement, Paxos would pay a $26.5 million fine and spend $22 million on reinforcing its compliance program. The NYDFS said Paxos also did not have proper due diligence against Binance, its erstwhile joint issuer and distributor of the BUSD stablecoin, and also had "systemic failures" in its anti-money laundering system.

One of the major issues was that Paxos could not properly monitor transactions for suspicious activity. The company failed to put in place strong internal controls to identify and report suspicious transactions to top management, as stated by NYDFS. An examination of Binance transactions between 2017 and 2022 found that $1.6 billion worth of digital currency transactions had connections with illicit actors. These involved flows to and from actors who were subject to sanctions by the U.S. Office of Foreign Assets Control (OFAC), but Binance kept on processing transactions related to them. "Regulated institutions should have in place adequate risk management systems commensurate with their business risks, including business partners and third-party vendors," stated NYDFS Superintendent Adrienne Harris.

The settlement highlights increasing regulatory attention to crypto companies' AML procedures and the dangers of doing business with platforms that operate in the regulatory gray areas. For Paxos, the scandal suggests how compliance failures can put regulated businesses at risk of significant legal and reputational exposure, even when they are not themselves responsible for the illicit activity. The $22 million spent on its compliance program will be directed to improve transaction monitoring, due diligence practices, and escalation procedures — essential protections in a sector under intensifying enforcement.