Binance CEO Changpeng ‘CZ’ Zhao ignored concerns raised by senior employees about his exchange’s weak KYC checks, amid a catalog of other regulatory shortcomings.
The news outlet claimed that senior Binance executives, including Chief Compliance Officer Samuel Lim and former Global Money Laundering Reporting Officer Karen Leong, raised concerns about the exchange’s weak KYC controls. Three former Binance employees told GLM they brought these concerns to CZ’s attention, but he “disregarded” them.
Binance has long been in the crosshairs of regulators around the world. Crack has previously reported on Binance multiple compliance deficiencies, which have drawn the ire of regulators in the UK , Italy , Malaysia , Singapore and many other jurisdictions. GLM The investigation spans many of these jurisdictions and has shed light on some of the internal mechanisms behind the exchange’s relationship with regulators.
GLM also found that some Binance staff, including Leong and Lim, were aware that Binance’s KYC procedures were not rigorous.
In a message sent in mid-2019, Leong said that CZ did not want to “kyc.” Leon also said: “Reduce KYC. Raise limits. BEST COMBO”, in the same message. Lim, in turn, expressed doubts about CZ’s plan to enter the fiat-to-crypto market. “Damn, why touch fiat if I don’t want to be compatible? So ironic LOL. Just stay full crypto man. Jizzus.”
Malta
Binance’s regulatory problems start in Malta.
In October 2018, Binance notified the Maltese regulators of its intention to apply for a license. GLM reports that CZ “got nervous” about the country’s anti-money laundering and financial disclosure standards. For 2019, the exchange decided not to pursue a license any further.
A public statement from the Maltese regulator dated February 21, 2020, confirmed that Binance was “not authorized” to operate in the crypto sphere. However, Binance continued to tell its clients that its terms of use agreement is governed by Maltese law, according to GLM.
Germany
And in Germany, police and lawyers who represented more than 30 victims of suspected fraud sent Binance “dozens of letters,” according to the GLM investigation.
According to a partnership with a German-registered financial services company, CM-Equity, Binance has agreed to take enhanced due diligence on a user if they deposit more than €10,000 ($11,000) in a single transaction.
By June 2021, Binance submitted to CM-Equity a revised version of this standard, in which the threshold for enhanced due diligence was increased to $100,000.
Between May and July 2021, Binance received 44 letters requesting information related to transactions worth at least €2 million. German police, prosecutors and law firms were collectively saying that these funds had been stolen and laundered through the exchange. Binance said it couldn’t help, according to GLM.
Additionally, the German federal police asked Binance for information on two men “suspected of aiding an Islamist gunman who killed four people in Vienna in November 2020.”
A letter from the German police reportedly found that one of these people made “unspecified” transactions on Binance.
International controversy
Elsewhere in the world, regulators in the Netherlands and Japan have issued warnings to customers about the exchange. Regulators in Italy and the Cayman Islands have said that Binance is not licensed to operate in their respective countries.
Binance faced legal action in Malaysia for operating illegally in the country, according to Malaysian regulators.
The UK also issued a consumer warning about Binance, and after saying that the exchange “could not” be regulated, Binance announced that it was seeking to repair its relationship with the FCA. To date, there is no evidence to suggest that Binance is in the good books of the FCA.
Binance also recently withdrew its license application in Singapore. A month earlier, city-state regulators put the exchange on their Investor Watch List .
Since Binance has Announced a Memorandum of Understanding with the Dubai World Trade Center Authority. In December last year, CZ also met with the Chief Minister of Gibraltar, Fabian Picardo, who described the CEO of Binance as a “visionary”.
decrypt has previously asked Binance about its plans for potential licenses, but the firm has yet to respond to our requests.
