Binance Under Investigation Over Bank Secrecy Act: Report

Binance Under Investigation Over Bank Secrecy Act: Report

US authorities are currently investigating whether Binance violated the Bank Secrecy Act, Reuters reported Thursday after federal prosecutors began investigating the company and its CEO in December 2020.

According to the report, the Justice Department's Anti-Money Laundering Division asked the world's largest crypto exchange nearly two years ago to hand over messages from CEO Changpeng Zhao and other executives on topics such as detecting illegal transactions and recruiting U.S. customers.

The 2020 letter reportedly requested nearly 30 documents that included, among other things, details about Binance's anti-illicit finance policies or reports of suspicious financial activity that it had filed with authorities.

The Bank Secrecy Act adopted in 1970, established program, record-keeping and reporting requirements for national banks, federal savings banks, federal branches and agencies of foreign banks, particularly to combat money laundering.

Crypto exchanges also fall within the scope of banking secrecy. Although Binance.US registered with the US Treasury in 2019, Binance's flagship platform did not, according to Reuters.

A Binance spokesperson told Blockworks in an email that the company has a global security and compliance team of more than 500 employees, including former regulators and law enforcement officials.

​​“As has been well documented, regulators around the world are reaching out to every major crypto exchange to better understand our industry,” the representative added. “We regularly work with agencies to clarify open questions.”

The spokesman did not comment on whether he was being investigated for violating banking secrecy.

Crypto exchange managers have already been stung by the Bank Secrecy Act

While Binance is reportedly engaged in its own bank secrecy investigation, four prominent executives at crypto derivatives exchange BitMEX have already been convicted of violations.

BitMEX co-founders Arthur Hayes and Ben Delo pleaded guilty in February. As part of the plea agreement, the pair were ordered to pay $10 million each for their role in the “willful failure” to implement and maintain anti-money laundering measures at BitMEX.

Another co-founder, Samuel Reed, pleaded guilty on the same count the following month and also agreed to pay $10 million. Earlier this month, BitMEX's head of business development, Gregory Dwyer, pleaded guilty to similarly violating the Bank Secrecy Act. He agreed to pay a $150,000 fine and faces up to five years in prison.

Hayes was sentenced to six months of house arrest, followed by two years of probation; Delo received 30 months probation; and Reed was sentenced to 18 months probation.

Regulation through enforcement will continue in the absence of a concrete legal framework for crypto, industry leaders and lawyers have told Blockworks.

The Reuters report came two days after U.S. Rep. Raja Krishnamoorthi, D-Ill., Letters sent to four federal agencies and five crypto exchanges – including Binance – requesting information about their anti-fraud and fraud mechanisms.

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The post Binance Under Investigation Over Bank Secrecy Act: Report is not financial advice.