FinCEN Fines Paxful $3.5 Million for Facilitating Money Laundering

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has imposed a civil money penalty of $3.5 million on Paxful Inc. and Paxful USA Inc. after identifying extensive and prolonged breaches of the Bank Secrecy Act. The peer-to-peer virtual currency platform facilitated more than $500 million in suspicious transactions linked to illicit actors and high-risk jurisdictions, including Iran, North Korea, and Venezuela, as well as payments associated with Backpage.com, a website previously seized for enabling prostitution and sex trafficking.

FinCEN concluded that Paxful wilfully failed to register as a money services business, to implement and maintain an effective anti-money laundering programme, and to file suspicious activity reports. These failures persisted over several years and allowed the platform to operate without meaningful controls while processing high-risk transactions across its global user base.

FinCEN highlighted that Paxful has since taken steps to address systemic failings, including replacing leadership responsible for prior deficiencies and reviewing historic activity to identify and report previously unreported suspicious transactions. These mitigating efforts were considered alongside the seriousness of the breaches when setting the penalty.

The enforcement action underscores the continuing expectation that virtual asset firms must apply risk-based controls commensurate with their products, services, and customer base. FinCEN reiterated that BSA obligations apply fully to transactions in virtual assets and prepaid access, and that firms should integrate monitoring for these products within their broader financial crime controls. This includes verifying customer identity, using IP and geolocation data to mitigate exposure to prohibited jurisdictions, and ensuring that monitoring systems can support the scale and complexity of transaction flows.

FinCEN also emphasised the importance of proactive remediation and maintaining a strong culture of compliance, led from the top. Firms are encouraged to act swiftly when deficiencies are identified and to ensure the timely submission of high-quality suspicious activity reports.

The action against Paxful aligns with FinCEN’s enforcement approach and reflects close collaboration with the Department of Justice, the US Attorney’s Office for the Eastern District of California, and Homeland Security Investigations. Further details, including the specific regulatory breaches, are set out in the publicly available Consent Order.

FinCEN reminded the public that its whistleblower incentive programme remains open to individuals worldwide who provide information leading to successful enforcement actions resulting in penalties above $1 million, subject to statutory requirements.

Read the press release here.