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Can New Rules Clean Up Binance’s Act on Money Laundering

With regulators looking to stop cryptocurrencies being used in money laundering, Binance needs to show it’s willing to tackle the issue.

Cryptocurrency exchange Binance has introduced more stringent background checks on its customers to fight money laundering.

It comes amid growing scrutiny of cryptocurrencies as a vehicle for money laundering. As the largest cryptocurrency trading platform in the world, Binance has also been on the receiving end of legal actions from banking authorities around the world.

The new Intermediate Verification standards the company has introduced will apply to all new users who want to access Binance products and service offerings, including cryptocurrency deposits, trades, and withdrawals.

Existing users will have their account permissions limited to withdrawal, order cancellation, position close, and redemption until they verify their credentials.

Binance CEO Changpeng Zhao, who goes by the initials CZ, said: “User protection is an integral part of our DNA and core values. Our vision is to create a sustainable ecosystem that is safe for all participants.

“In the last four years, we have laid the groundwork by investing heavily in security and user protection, supporting law enforcement from around the world with high-profile investigations and helping cybercrime victims recover millions of dollars’ worth of stolen funds.

“We aim to work more collaboratively with policy-makers to improve global standards and discourage bad actors.”

In addition, the company hired a former US Treasury criminal investigator, Greg Monahan, as its Global Money Laundering Reporting Officer.

His job will be to expand the company’s anti-money laundering and investigation programmes. He will also be responsible for strengthening its relations with regulatory and law enforcement bodies worldwide.


Money Laundering

Binance’s operations took a major hit when the company was banned from operating in the UK by the Financial Conduct Authority (FCA). The move meant that the company could not engage in regulated activities, such as issuing electronic money or dealing in investments.

While the FCA did not explain the reasoning behind its decision, it was seen as forming a wider effort to regulate cryptocurrency investment platforms.

It also came at a time when the FCA warned that many cryptoasset businesses were not meeting money laundering standards. According to blockchain analysts Chainalysis, 2019 saw criminals launder around $2.8 billion worth of cryptocurrency.

According to the group, Binance received 27.5% of 2019’s illicit bitcoins, the biggest share of all exchanges.

Since the technology is inherently anonymous and transactions can be made quickly, cryptocurrencies are popular with criminals. Creating a wallet requires minimal personal identifying information and bypasses banking infrastructure and scrutiny by banking authorities.

The only record of the transaction is stored on the blockchain, which is cryptographically secure.

The FCA has previously warned that investing in cryptocurrencies is an inherently risky strategy.

Last month, Metropolitan police seized £180 million worth of bitcoin as part of a money laundering investigation. This came after a similar, £114-million seizure in June.

In addition to falling foul of the UK’s FCA, other countries have told Binance that it is operating illegally, including Japan, Germany, and the Netherlands. The US has even banned the group, though it operates there under an independent company, Binance US.

As such, the move by Binance signals that cryptocurrency’s honeymoon period may be coming to an end.

National financial authorities are looking to rein-in unregulated cryptocurrencies, while the larger platforms will likely accept that following the rules is simply the cost of doing business.

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