Cryptocurrency exchange Binance is said to have extremely lax anti-money laundering regulations, despite frequent public statements that promote legal compliance.
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Binance is accused of “setting up a screen” to cover the public’s eyes
Newspaper Reuters The evening of January 21 published a special investigative report targeting Binance, the world’s largest cryptocurrency exchange. Post by Reuters Although from the outside, Binance always insists to comply with regulatory regulations, but in reality, this unit often hides information from financial authorities, does not strictly manage anti-counterfeiting activities. money laundering and customer identity verification, as well as acting against the recommendations of the exchange’s own compliance department.
The article opens with the event that Binance “migrated” to Malta and applied for a license to operate in this Mediterranean island nation after encountering many legal troubles in East Asian countries. Binance CEO Changpeng Zhao at the time also confirmed that Malta could become the new headquarters of Binance. However, the good relationship between the two sides quickly fell apart. Whereby, Reuters stated that it was Malta’s strict anti-money laundering and financial disclosure regulations that made Binance change its mind. By 2020, the exchange completely reversed all previous agreements with Malta, even canceling charitable payments. During that time, though, Reuters accused Binance of still promoting its image as regulated by the Maltese government.
The world’s largest #crypto exchange @Binance maintained weak money-laundering checks on customers and acted against its own compliance department’s recommendations, a @specialreports investigation has found https://t.co/BoRXfUz96z via @AABerwick @tomwilson1983 pic.twitter.com/MkQ8JA42jr
— Reuters (@Reuters) January 21, 2022
Reuters then said that he had conducted interviews with dozens of former senior employees, advisors and partners of Binance, as well as access to many confidential documents, information exchanges between the exchange and regulatory agencies. financial management. The conclusion reached by the news agency was that Binance was operating outside the framework of regulations governing both traditional financial institutions and crypto companies. In addition, the newspaper also alleged:
– Binance intentionally maintains a dubious business model from which to create and offer financial products that many countries will not allow trading.
– Binance repeatedly evaded the publication of the country of registration of operations, complicating the supervision of the authorities and at least 4 times refused to provide information about business activities despite being approved by the authorities. request capacity.
– Binance intentionally minimizes customer identity verification to cut operational costs.
– The current Chief Compliance Officer of Binance is Samuel Kim, former Anti-Money Laundering Manager Karen Leong and 3 other former senior personnel who have spoken out about the exchange’s weak KYC and anti-money laundering mechanisms, but all ignored by CEO Changpeng Zhao.
– Binance works against the recommendation of the exchange’s own compliance department by continuing to provide services to users in Russia and Ukraine, countries that are blacklisted for money laundering by many global financial institutions. and has been assessed as “extremely risky” by compliance.
– In 2021, Binance broke the legal compliance regulations agreed with a German partner, much to the displeasure of many employees. According to Coin68, this partner is most likely CM-Equity, a company specializing in providing financial derivatives, which Binance cooperated with to create a tokenized security product in April 2021. However, by July, the exchange was forced to completely cancel the product because of legal pressure from the German authorities.
– Binance refused to help German authorities investigate a crypto money laundering scheme that affected 30 victims and resulted in several million euros in damages.
– German police once asked Binance to assist in the investigation of 2 suspects believed to be related to the Islamic extremists who killed 4 people in Vienna (Austria) in October 2020. One of the suspects had made transactions with Binance, but the exchange also refused to assist.
Being Reuters Commenting on the above findings, a spokesperson for Binance stated that the information collected by the newspaper is now “outdated and in some points completely untrue”. The floor representative said the evidence Reuters obtain “shows only a partial picture of the serious decisions the exchange has made with customers”.
Meanwhile, CEO Changpeng Zhao, Chief Compliance Officer Samuel Lim and former Anti-Money Laundering Manager Karen Leong all declined requests for interviews.
Mr. Changpeng Zhao later posted his personal statement about the incident on Twitter:
FUD. Journalists talking to people who were let go from Binance and partners that didn’t work out trying to smear us. We are focused on anti-money laundering, transparent and welcome regulation. Action speaks louder than words. Thank you for your unwavering support! 🙏
– CZ 🔶 Binance (@cz_binance) January 21, 2022
“It’s all just FUD. The journalists only interviewed former employees of Binance and those who do not cooperate with us, so now they turn to smear us. We are very concerned with anti-money laundering, transparency and are ready to comply with the law. Thank you for constantly supporting us.”
Binance’s Legal Troubles in 2021
As reported by Coin68, during the 2nd and 3rd quarters of 2021, Binance faced a wave of legal action from many countries, including:
Previously, the exchange had to delist the “security token” product, reduce the futures trading leverage to only 20x (compared to the maximum 125x), impose a withdrawal limit, requiring all users to have to The latest and intermediate KYC is to stop providing services in Korea, Hong Kong and Singapore.
In July, Binance CEO Changpeng Zhao himself acknowledged the pressures his platform is facing. The executive stated that the exchange will have to change direction to ensure compliance with the law, including applying for a license as a “financial institution” in countries and abandoning the culture. “decentralized work” to conduct the establishment of the official headquarters, and at the same time do not exclude the replacement of the CEO to match the new orientation.
In the fourth quarter of 2021, the legal tension has somewhat cooled down, giving Binance the opportunity to regain its image in the eyes of investors. The floor has had countries to promote in the field of sports, cooperate with some big European teams and many famous players such as Andres Iniesta; spend 115 million USD to develop cryptocurrency ecosystem in Europe; negotiate cooperation with large corporations in Indonesia, Thailand, Singapore to establish trading platforms; “reputation” to raise capital for the Binance.US platform; as well as pivoting to the Middle East through agreements between the exchange and regulators, leading to speculation that Binance will be headquartered in Dubai. The exchange confirmed that after a difficult period in the middle of the year, only 3% of users decided to leave the exchange.
In addition, CEO Changpeng Zhao affirmed that he is willing to give up to 99% of his assets to charity. According to the latest statistics, Mr. Zhao’s fortune at Binance (excluding personal crypto investments) could reach $96 billion, making the CEO the richest billionaire in the crypto industry.
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