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The Dutch Central Bank (DNB) has announced a multimillion-euro penalty on Payward International Markets Limited (Payward International), which otherwise operates under the trade name Kraken.
Kraken, the US-based crypto exchange, has been fined €4m for failing to comply with anti-money laundering (AML) laws in the Netherlands, according to an announcement by the DNB.
The fine was imposed because Payward International provided crypto services in the Netherlands without registration with the DNB, which is against the law.
Companies wishing to provide crypto services in the Netherlands are required to register with the DNB pursuant to the Anti-Money Laundering and Anti-Terrorist Financing Act.
The registration requirement for crypto service providers was introduced in May 2020 due to the introduction of the 4th Anti-Money Laundering Directive (4th AMLD).
Kraken contravened the objectives of the law by providing crypto services in the Netherlands without registration with the DNB.
Among other factors, this meant that the company was unable to report unusual transactions to the Financial Intelligence Unit-Netherlands during the period of non-compliance.
As a result, the DNB said that a large number of unusual transactions may have gone unnoticed by the investigative authorities during this period.
An order subject to penalty was placed on Kraken in July 2023 requiring Kraken to stop offering crypto services in or from the Netherlands without the required registration with the DNB.
The central bank gave the company a period of eight weeks to comply with the order without being required to pay penalties.
This period ended on October 7, 2023, and the order subject to penalty indicated that Kraken would have to pay €500,000 in penalties immediately after the expiry of this period for each week during which it failed to comply with the order in full.
This penalty amount could reach a maximum of €4m, and as eight full weeks have passed, Kraken is now liable to pay this maximum.
In a statement shared with Vixio, a Kraken spokesperson said the company “strongly contests the position of the DNB that the company historically violated local regulations”.
The spokesperson added that the company will pay the fine and “is keen to move forward”.
“We have always operated in line with guidance from Dutch lawmakers and DNB itself,” said the spokesperson, adding that before obtaining a virtual asset service provider (VASP) registration with DNB in February 2024, it did not market its services to Dutch clients or otherwise actively target the Dutch market.
The spokesperson continued that Kraken is committed to growing while remaining in compliance with European regulations and has obtained several registrations over the past year, including in the Netherlands.
It also holds a VASP registration in Spain and an e-money licence in Ireland.
“While we disagree with DNB’s position, we remain excited about the opportunity to serve the Dutch market and are looking forward to building a strong relationship with the DNB and contributing to the ongoing development of the Dutch crypto landscape,” the spokesperson said.
“In addition to obtaining a VASP registration, our commitment to the Dutch market is further highlighted by our proposed acquisition of crypto broker Coin Meester B.V. (BCM),” they said.
Kraken has also faced regulatory challenges in the US.
In November, the Securities and Exchange Commission (SEC) said in its case that since at least September 2018 Kraken has made hundreds of millions of dollars unlawfully facilitating the buying and selling of crypto asset securities.
The SEC alleged that Kraken intertwines the traditional services of an exchange, broker, dealer and clearing agency without having registered any of those functions with the SEC as required by law.
Kraken’s alleged failure to register these functions has, according to the regulator, deprived investors of significant protections, including inspection by the SEC, recordkeeping requirements and safeguards against conflicts of interest.
