Binance Reportedly Ignored Warnings About Weak KYC
Binance often made headlines in 2021–not all of them were positive. Regulators in different countries issued warnings against the cryptocurrency exchange giant and its affiliates, stating that the firm was not licensed to operate in their jurisdictions. From the United Kingdom to Singapore, from Japan to Italy, Binance came under increasing regulatory scrutiny.
Meanwhile, Reuters published a report that claimed Binance withheld information from regulators. The international news agency cited talks with several former Binance senior employees, business partners and advisers, and various documents which included private correspondence between national regulators and the crypto exchange.
The report stated that senior Binance staff had expressed concerns about the weak KYC checks employed by the platform. According to Telegram messages seen by Reuters, senior employees such as Samuel Lim, Chief Compliance Officer, and Karen Leong, former Global Money Laundering Reporting Officer, observed that customer background checks were not stringent enough.
Furthermore, Binance reportedly frequently ignored its anti-money laundering risk alerts and onboarded customers from seven countries on its restricted list, including those countries where risk ratings were deemed extreme–specifically Russia and The Ukraine. Reuters stated that the exchange “manually adjusted” risk ratings for both countries in order to continue servicing users.
Unpleasant Relationships with Regulators
Following the clampdown on the cryptocurrency sector by the Chinese government back in 2017, Binance left China and turned its attention to its booming business in Japan. However, Japanese authorities later stated that the company was not licensed to operate in the country.
Binance CEO, Changpeng Zhao, also known as “CZ”, later found an operating haven in Malta. However, Binance withdrew its license application in October 2019, when it was discovered that Binance failed to meet the requirements for setting up a base on the Island country.
The Reuters investigation also revealed that Binance did not have a pleasant relationship with German authorities. In 2020, the platform struck a partnership deal with Munich-based registered financial services firm CM-Equity. Binance said that it would carry out rigorous background checks on users who deposit €10,000 ($11,332) at once. However, in June 2021, the company’s compliance team reportedly changed these terms, stating that it would only scrutinize customers who deposited over €100,000 ($113,329) in one transaction.
Meanwhile, the Binance team in Germany received 44 letters between May and July 2021 asking for information regarding transactions worth at least €2 million. Associated funds were said to be stolen and laundered through the exchange.
In addition, the German Federal Criminal Police Office sent a letter of enquiry for information about “two men suspected of assisting an Islamist gunman who killed four people in Vienna in November 2020.” According to the letter, there were suspicions that the men carried out crypto transactions on Binance.
Binance Dismisses Reuters’ Findings
A Binance spokesperson refuted the Reuters investigation, saying that it was “wildly outdated and – in several places – flatly incorrect.” Also, the company’s legal representatives said the documents seen by the news agency were “partial and do not accurately reflect the full picture in relation to how decisions relating to very serious issues have been made by our client.”