Garantex exchange operator loses crypto-licence to operate in Europe

The legal entity of the Garantex cryptocurrency exchange has relinquished its license to operate with virtual currencies after the discovery of a number of systemic violations in its activities. ForkLog was told this by representatives of the Estonian Money Laundering Data Bureau (RAB).

The Financial Intelligence Unit began an audit of Garantex Europe OÜ in December 2021. According to Matis Mäeker, head of RAB, the company drew the regulator’s attention with an annual turnover exceeding €5 billion, as well as links to Russia and other high-risk countries.

RAB specialists established that the exchange had taken “inadequate” measures to prevent money-laundering and terrorist-financing risks. Among them were a shortage of staff, an ill-conceived risk appetite strategy, and violations of internal control procedures.

“More than 90% of Garantex users did not pass identity checks. Some of the clients listed as individuals turned out to be legal entities providing services to other clients. The turnover of some of them ranged from €20 million to €100 million,” the Bureau said.

The trading platform systematically failed to notify RAB of suspicious operations related to money laundering or the financing of terrorism. It was also established that the assets moved through Garantex Europe OÜ were linked to criminal activity or wallets used by criminals for illicit purposes.

Because the identified deficiencies would have led to the revocation of the company’s license to carry out business activities at the end of the proceedings, Garantex Europe OÜ voluntarily relinquished it, according to RAB. Its license had been valid from 27 November 2020 to 24 February 2022.

In ForkLog’s comment, representatives of Garantex Europe OÜ explained their decision by the entry into force of new licensing rules for cryptocurrency exchange activity in Estonia.

“In agreement with the Estonian regulator, we surrendered the old license for reissuance under the new rules,” they said.

As Chainalysis noted in mid-February, more than $645 million, related to suspicious transactions during 2019-2021, passed through Garantex. According to them, the exchange received more than $10 million from ransomware operators, including NetWalker, Phoenix Cryptolocker and Conti.

At the time, ForkLog said that Garantex representatives claimed they were cooperating with Crystal analysts and promptly blocked all transactions marked as “ransomware.”

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