Changpeng Zhao (or CZ), Binance’s CEO, ignored concerns voiced by senior officials about the exchange’s weak “know your customer” (or KYC) checks amid a list of other regulatory failures, reports the exchange. Reuters in an investigative report published this Friday (21).
The news outlet says senior Binance executives, including Chief Compliance Officer Samuel Lim and former Global Head of Money Laundering Notifications Karen Leong, have expressed concerns about weak ‘know your customer’ (KYC) checks. in English of know your customer) of the brokerage.
Three former Binance employees told Reuters they brought these concerns to CZ’s attention, but he “ignored” them.
Binance has long been targeted by regulators around the world. Decrypt had previously reported on Binance’s multiple regulatory inadequacies, which had drawn the ire of regulators in the UK, Italy, Malaysia, Singapore and many other jurisdictions.
The Reuters investigation includes many of these jurisdictions and focused on some of the internal work behind the brokerage’s relationship with regulators.
Reuters also found that some Binance employees, including Leong and Lim, knew that the exchange’s KYC procedures were not strict.
In a message sent in 2019, Leong said that CZ didn’t want any KYC. Leong also said “Reduce KYC. Raise the limits. THE BEST COMBO” in the same message.
Lim, for his part, expressed doubts about CZ’s plan to enter the “fiat to crypto” conversion market. “Damn, why involve fiduciaries if you don’t want to comply with compliance. It’s so ironic KK. Stay completely in crypto, man. Jesus.”
Binance’s regulatory problems started in Malta.
In October 2018, Binance notified regulators in Malta of its intention to apply for a license. THE Reuters reported that CZ “got nervous” about the country’s anti-money laundering regulations and financial disclosure standards. In 2019, the broker gave up on acquiring a license.
One public statement from the Maltese regulator dated February 21, 2020 confirmed that Binance was “not authorized” to operate in the crypto sector.
In Germany, police and lawyers, representing more than 30 suspected fraud victims, sent “dozens of letters” to Binance, according to the investigation. Reuters.
In accordance with a partnership with a German-registered financial services company, CM-Equity, Binance has agreed to perform an enhanced due diligence for a user if they deposit more than €10,000 (or $11,000) in a single transaction.
In June 2021, Binance sent CM-Equity a revised version of this standard, which made the threshold for the audit skyrocket to $100,000.
Between May and July 2021, Binance received 44 letters asking for information on transactions worth around €2 million.
German police, prosecutors and law firms collectively claimed that these funds were stolen and laundered at the brokerage. Binance said it could not help them, according to the Reuters.
In addition, German federal police asked Binance for information about two men “suspected of helping a gunman who had killed four people in Vienna in November 2020”.
A letter from German police allegedly found that one of these people carried out “unspecified” transactions on Binance.
Elsewhere in the world, regulators in the Netherlands and Japan have issued consumer warnings about the broker. Regulators in Italy and the Cayman Islands said Binance is not licensed to operate in their respective countries.
Binance has faced further enforcement action in Malaysia for operating illegally in the country, according to local regulators.
The UK has also issued consumer warnings about Binance and after claiming the exchange was “unable” to be regulated, the company announced that it was seeking to restore its relationship with the Financial Conduct Authority (or FCA).
To this day, there is no evidence to suggest that Binance is on a clean plate with the FCA.
Recently, Binance also removed its request in Singapore. A month later, local regulators placed the brokerage on their Investor Alert List.
Since then, Binance has announced a Memorandum of Understanding with the Dubai World Trade Center Authority. In December 2021, CZ also met with Fabian Picardo, Minister of Gibraltar, who described the CEO as a “visionary”.
*Translated and edited by Daniela Pereira do Nascimento with permission from the Decrypt.co.