Binance Kept Weak Money-laundering Checks Even as it Promised Tougher Compliance, Documents Show

In public, Binance -- by far the world's largest cryptocurrency exchange -- said it welcomes government oversight. At the same time, the firm was withholding information from regulators, maintaining weak checks on customers and acting against its own compliance department's recommendations, a Reuters investigation has found. From the report: The reporting shows Binance has operated outside rules that govern traditional financial firms and many crypto rivals. An opaque corporate structure has enabled Binance to offer products that many national regulators don't allow locally registered firms to sell. Binance has repeatedly declined to specify in which jurisdiction its main online exchange is based, complicating regulators' efforts to oversee its activities. And it has minimised costly client background checks. On at least four occasions, Binance declined to provide detailed answers about its operations when asked by financial authorities and business partners, according to regulatory filings and people with direct knowledge.

In encrypted Telegram messages seen by Reuters, Binance staff, including Chief Compliance Officer Samuel Lim and former Global Money Laundering Reporting Officer Karen Leong, raised worries about weak 'know-your-customer' checks aimed at preventing money laundering. Three former senior Binance employees told Reuters they voiced such concerns to Zhao himself but he ignored them. Binance acted against its own compliance department's assessment by continuing to recruit customers in seven countries, including Russia and Ukraine, judged to be of 'extreme' money-laundering risk in an internal report circulated in early 2020 that was seen by Reuters. Last year, Binance watered down compliance rules arranged with a German business partner, causing disquiet among some Binance staff.

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