Reuters investigation accuses Binance and Changpeng Zhao of promoting money laundering.
The media Reuters has just published a lengthy investigation revealing Binance’s questionable practices in preventing money laundering and terrorist financing. So what do we know, and why is this a problem?
Binance and Changpeng Zhao accused by Reuters investigation
The very long investigation by Reuters shows, with supporting documents, that Binance would have been reluctant to transmit the information which would have facilitated inquiries concerning money laundering. In addition, the exchange platform would have had deliberately opaque practices to dodge local regulations:
“Binance has operated outside the rules that govern traditional finance firms and many of its crypto-rivals. An opaque corporate structure has allowed Binance to offer products that many local regulators do not allow regulated firms to offer».
Binance reportedly “minimized costly background checks on its customers,” allowing suspicious actors to use its services.
Changpeng Zhao allegedly ignored warnings from his staff.
Reuters was able to view messages sent by Binance’s chief compliance officer, Samuel Lin, and the executive responsible for the prevention of money laundering, Karen Leong. The latter reportedly reported to CEO Changpeng Zhao that identity verification (KYC) procedures were weak. But according to Reuters, “CZ” would have ignored these reports and would not have changed the process.
Additionally, an internal report from 2020 found that Binance should have avoided countries that pose an “extreme” money laundering risk, such as Russia and Ukraine. But Binance executives reportedly ignored that same report to offer services in the territories in question.
Money laundering from Germany?
Reuters also reportedly consulted dozens of letters sent by police forces and lawyers in Germany. The latter would have asked Binance for information on millions of euros that would have passed through the exchange platform to be laundered. But the company would have refused to accede to these requests.
In addition, Binance would have ignored part of the compliance rules when creating a partnership with a German company. But, again, the company’s teams would have reported the problem rather than ignored it.
Last case from Germany that was revealed in the investigation: the German federal police would have requested information on people who would have assisted a terrorist who killed four people in Vienna in 2020. According to the Reuters report, one of these two men reportedly made a transaction on the exchange.
Binance Responds to Reuters Accusations
Contacted by Reuters, Binance’s spokesperson considered that the information published by the media was “very outdated and in several places simply incorrect “, without specifying which ones.
The company’s legal representatives also explained that Reuters’ documents showed only a part of Binance’s operations. And “did not accurately reflect how our client made decisions concerning these severe problems“.
The survey is extensive, and the reader is invited to consult it in its entirety to get an idea of the situation. The occurrence of this publication comes in any case in parallel with a significant change of course for Binance.
The exchange platform found itself under the crossfire of disgruntled regulators throughout 2021. It, therefore, reviewed its copy, abandoned its decentralized model, and began to show its credentials to regulatory institutions. Will this be enough to make the pill of this Reuter’s report pass? We ignore it for the moment.