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The Finnish Financial Supervisory Authority (FIN-FSA) has fined LocalBitcoins over anti-money laundering and counter-terrorism financing (AML/CTF) failures, citing widespread deficiencies in customer due diligence and identity verification.
The financial penalty stems from a 2024 inspection of the now-defunct peer-to-peer bitcoin platform’s AML/CTF controls.
FIN-FSA found that LocalBitcoins failed to adequately identify and verify customers when establishing business relationships, an essential requirement under Finland’s AML legislation.
The regulator said the fine reflects the nature, extent and duration of the breaches, as well as the company’s financial position.
LocalBitcoins, which launched in 2012, ceased onboarding new customers in February 2023 and disabled wallet deposits by June 2023, despite having been licensed under Finnish virtual currency laws since 2019.
Missed identity checks
Although it halted trading operations, LocalBitcoins, which makes clear on its website that it has “been closed”, continued to admit new Tier 0 users as late as June 2022, FIN-FSA said.
These customers were not subject to full identity checks, which the company justified by claiming an exemption for "occasional customers" under Finnish AML law.
The firm maintained that accounts with less than €1,000 in transactions annually did not qualify as regular business relationships, and that stricter requirements would hinder financial inclusion, particularly for low-risk users such as refugees.
The regulator rejected that interpretation, saying that Tier 0 users, who could access trading and wallet services, create accounts and accept the platform’s terms of service, were in fact engaging in continuous business relationships.
As such, full identification and verification obligations applied, regardless of transaction size.
FIN-FSA’s inspection revealed significant gaps in customer records: 164,546 users lacked verified date of birth or nationality, 112,474 were missing address details, and 201 users had no name on record.
In addition, identity verification was incomplete for more than 160,000 customers.
An area of significant risk
The authority highlighted that virtual currency services are consistently ranked among the highest-risk sectors in national AML risk assessments due to their anonymity, global reach and transaction speed.
It said that LocalBitcoins’ failure to meet core AML standards in such a high-risk environment was a central factor in the enforcement action.
The company, which featured in a 2019, Financial Times feature on Europe’s fastest-growing companies, now has the right to appeal the decision to the Helsinki Administrative Court within 30 days of receiving formal notice.
