Binance’s new chapter begins with hefty fines and compliance commitments

Binance issued a statement on Nov. 21 regarding its resolution of investigations from the U.S. Department of Justice (DOJ) and other agencies.

There, Binance stated that it is pleased to announce the resolution and admitted to past wrongdoing. The crypto exchange company said:

“When Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming … Binance made misguided decisions along the way. Today, Binance takes responsibility for this past chapter.”

The company said that the current resolutions acknowledge its role in “historical, criminal compliance violations” and allow it to “turn the page.”

Binance emphasized that the U.S. agencies do not allege that it misappropriated user funds or engaged in market manipulation. In that regard, it mentioned its other promises, such as its 1:1 backing of user assets, its commitment to allowing 100% withdrawals at all times, and transparency around its own crypto addresses.

The company also highlighted its recent restructuring efforts and past additions to compliance leadership. It noted that it will appoint its Global Head of Regional Markets, to the role of CEO, in line a statement from former CEO Changpeng Zhao today.

Binance addresses KYC/AML concerns

In a statement, the DOJ said that Binance violated financial laws including the Bank Secrecy Act (BSA) and failed to register as a money transmitting business.

The DOJ said Binance was required to register with FinCEN as a money services business and create an effective anti-money laundering (AML) policy but did not do so. Elsewhere, it said that Binance did not implement comprehensive know-your-customer (KYC) procedures: it neglected monitoring, never reported suspicious activities to FinCEN, and at times supported users who only provided an email address.

Binance appeared to acknowledge those issues, noting that it has recently expanded its anti-money laundering (AML) tools and capabilities. It also called itself one of the first major exchanges outside of the U.S. with mandatory KYC for all users.

International access to Binance also an issue

The DOJ additionally said that Binance violated the International Emergency Economic Powers Act (IEEPA) and described various violations around international transaction restrictions. The agency said that Binance failed to implement controls stopping users from transacting with sanctioned users and users in sanctioned areas.

The DOJ added that Binance did not fully block U.S. customers in 2019 in compliance with the law. Binance instead focused on retaining high-value VIP customers and providing those users with ways to circumvent restrictions.

Binance once again seemed to address those complaints in its statement. Binance said that it “takes sanctions compliance seriously,” maintains a standalone sanctions team, enforces KYC and IP blocks, and uses third-party tools to monitor transactions in real time. Furthermore, the company said that it has teams staffed with more than 70 members to engage with law enforcement and share information.

Binance has pleaded guilty: its statements address oversight in the relevant areas without contesting specific allegations. The firm has also agreed to pay over $4 billion in fines, retain an appointed monitor for three years, and improve compliance.