The world’s largest crypto exchange, Binance, is reportedly facing another investigation by the United States Department of Justice (DOJ) national security division to see whether or not it has violated sanctions imposed against Russia. The DOJ is looking into the crypto exchange’s provision of services and whether Binance allowed Russian consumers to move money to go around sanctions on the country’s financial institutions.
According to a Bloomberg report on May 5 2023, the US Department of Justice centres on whether Binance allowed Russians to avoid the sanctions. However, there have been no accusations against the company or its executive concerning the investigation. The news service said that the investigation by the DOJ’s national security division parallels another investigation by its criminal division. According to the Bloomberg report, the exchange is debating whether to settle with the DOJ regarding the preceding allegations.
Previous investigations
The exchange is the object of several investigations in the US, including Anti-Money Laundering (AML) violations and the DOJ inquiry. The United States and the European Union prescribed sanctions against Russian financial institutions following the Ukraine invasion. Vice Prime Minister of Ukraine, Mykhailo Federov, asked significant crypto exchanges to stop all Russian and Belarusian accounts simultaneously. Federov said, “It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians but also to sabotage ordinary users.” However, Binance was one of the companies that refused to do so and cited that it would harm civilians and counter their ideals. In an interview with experts at Coin Insider, Binance Spokesperson said, “To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.” Binance added, “It wouldn’t unilaterally freeze millions of innocent user’s accounts.”
Coinbase supported Binance by similarly stating that it is already sanctioning entities and people in Russia as the law required but will not go any further. Coinbase noted, “A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilisation as a result of their government’s aggression against a democratic neighbour.” Other exchanges also said they would only go within everything required by the law. CEO of Kraken Jesse Powell said, “Such a move would violate the company’s libertarian values.”
According to the Wall Street Journal (WSJ) report on February 15 2023, Binance worked with regulators to remedy past compliance issues. Binance’s Chief Strategy Officer, Patrick Hillmann, said, “Binance is working with regulators to figure out what remediations we must go through are now to make amends for that.” Hillmann added, “The outcome of ongoing investigations will likely be fine but could be more, but that’s for the regulators to decide. Binance is highly confident and feeling really good about where these discussions are going.” Binance’s Chief Strategy Officer concluded, “Resolving issues with US regulators would be good for the firm and its future. It will be a good moment for our company because it allows us to put it behind us.”
In 2018, the DOJ started investigating Binance compliance tips, the US Anti-Money Laundering laws and sanctions. Binance was being investigated on charges relating to unlicensed money transactions, money laundering conspiracy and criminal sanctions violations. According to Binance Spokesperson, regulators were doing a broad review of every crypto company against many of the same issues. Binance Spokesperson said, “This nascent industry has grown quickly, and Binance has shown its commitment to security compliance through large investments in our team as well as the tools and technology we use to detect and deter illicit activity.”
Earlier this year, on March 27 2023, the United States Commodity Futures Trading Commission (CFTC) filed a suit against Binance and CEO Changpeng Zhao (CZ) for trading violations. The lawsuit stated that the exchange failed to meet its regulatory obligations by not accordingly registering with the derivatives control. Since 2021, Binance has been the focus of a CFTC investigation; in addition to the CFTC, the Internal Revenue Service and federal prosecutors have investigated Binance’s adherence to Anti-Money Laundering rules. Earlier this year, CFTC charged Binance for not asking consumers to verify their identities, offering unregistered crypto derivatives and implementing measures to avoid US regulations.
According to the report, Binance states that it was compliant with US and international sanctions and that its Know-Your-Customer (KYC) protocols align with those of traditional banking. The report noted, “Every customer is subject to identity and residency checks. Our policy imposes a zero-tolerance approach to double registrations, anonymous identities, and obscure sources of money.”
The Bloomberg report cited that Binance has been in discussion with the DOJ; however, Binance being investigated for violating sanctions is nothing new, as the exchange has faced numerous probes from the United States over the years and has managed to overcome them. All the same, the report states that the DOJ is open to working with the exchange.
