Reuters accuses Binance of withholding information from regulators

Binance repeatedly concealed information from regulators, flouted KYC procedures, and acted against the recommendations of its own compliance department. This is according to a comprehensive Reuters investigation.

Sources told the agency that Binance rejected the idea of opening a Malta-based unit and obtaining a licence from the local financial regulator when it learned of strict AML protocols and disclosure requirements.

In 2019 the exchange privately notified MFSA that it had abandoned its plan, yet continued to claim that its activities “are regulated by Maltese law.” In 2020 the regulator said Binance did not have a licence to operate in the jurisdiction. The information was soon confirmed by the company’s CEO, Changpeng Zhao.

The agency noted that Binance “at least four times” declined to provide detailed reports on its operations when regulators or partners requested the information. In particular, the requests concerned the corporate structure and the company’s finances.

For example, when Binance began offering tokenised shares in Italy, the local regulator — Consob — required the exchange to ensure the product complied with local law, as the instruments were treated as financial instruments.

In response to the regulator’s request, Binance’s chief compliance officer Samuel Lim said the company does not provide “investment services,” and that its activities are regulated by Swiss law. In a conversation with Reuters, a Swiss financial regulator official stressed that the local unit of the exchange “has no licence.”

Journalists said that documents obtained by Reuters reveal concerns that Binance staff, including Lim, repeatedly raised about lax KYC checks. Several Reuters sources said they told Zhao.

Yet the head of the exchange allegedly wanted “KYC to be abolished,” insisting that users should be able to “trade within ten minutes of signing up.”

Sources said Lim lacked the competence to run a compliance department of such a large operation. One former employee said that top executives “feared” Zhao and yielded to his requests.

In at least three countries, including Russia and Ukraine, Binance operated contrary to its own risk-scoring. The latter two were assigned an “extreme” risk level. Such a rating means the firm should not serve clients in those jurisdictions.

Reuters, citing the documents in hand, alleges that these ratings were “manually adjusted” — the countries were assigned a “high” risk level.

ForkLog sought comment from Binance representatives but did not receive a prompt reply.

The agency also said that Binance refused to cooperate with German law enforcement in cases related to money laundering. Police believed that through the platform, scammers and terrorists conducted illicit activity.

Changpeng Zhao called the agency’s investigation “FUD.” He said journalists are trying to smear the company by talking to people who were fired from Binance and to partners who did not work out with the exchange.

FUD. Journalists talking to people who were let go from Binance and partners that didn’t work out trying to smear us. We are focused on anti-money laundering, transparent and welcome regulation. Action speaks louder than words. Thank you for your unwavering support! 🙏

— CZ 🔶 Binance (@cz_binance) January 21, 2022

During 2021, regulators in several jurisdictions, including Netherlands, Italy, United Kingdom, Poland, Japan, Thailand, Hong Kong, Singapore and South Africa, issued warnings about Binance’s activities or took measures against the exchange.

In December, the Ontario Securities Commission said that Binance did not have a licence.

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