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Cryptocurrency company Binance, one of the largest crypto exchanges in the world, has recently found itself in hot water as it faces federal charges for a variety of financial crimes. The company’s alleged activities have raised concerns about the cryptocurrency industry and potential risks for investors, and have resulted in a hefty fine and the resignation of Binance’s CEO. Here’s everything you need to know about the federal charges held against crypto company Binance.
Anti-Money Laundering Program Violations
For starters, Binance admitted to engaging in Anti-Money Laundering (AML) program violations. The 1970 Bank Secrecy Act requires banks and other financial institutions to keep certain records and follow guidelines to avoid unknowingly funding terrorism or money laundering operations, and Binance failed to maintain an effective AML program.
The DOJ report highlights that Binance failed to systematically monitor their users and transactions and never filed reports of suspicious activities with the Financial Crimes Enforcement Network (FinCEN). This theoretically allowed transactions from illegal activities to flow through the platform.
Unlicensed Money Transmitting
The DOJ report further reveals that Binance failed to register as a money-transmitting business, another violation of the Bank Secrecy Act. Money service businesses are required to submit FinCEN Form 107, the Registration of Money Services Business form, which documents information about the business and assists law enforcement officers in preventing and tracking illegal financial activity.
Federal Sanctions Violations
Another major charge brought against Binance includes sanctions violations. The U.S. government will sometimes place sanctions on other countries that are at war with the U.S. or its allies, forbidding U.S. companies from engaging in business with those foreign powers.
Binance did not implement restrictions to keep their U.S. users from trading with people in sanctioned countries, which reportedly allowed nearly $900 million in money transfers to Iran alone.
What Is Happening To Binance?
Binance pleaded guilty to the charges brought against them and has agreed to pay over $4 billion in total financial penalties, including forfeiting over $2.5 million in earnings and paying a criminal fine of over $1.8 million. The company will also be monitored by a third-party organization for the next three years to ensure that it implements anti-money laundering programs and follows sanctions laws. Binance’s founder and CEO, Changpeng Zhao, also pleaded guilty to the charges and resigned from his position.
Regulatory Response and Future Implications
The regulatory response to Binance’s violations emphasizes the government’s commitment to enforcing compliance in the cryptocurrency industry. The substantial penalties imposed on Binance are historic and serve as a warning to other crypto and decentralized finance (DeFi) companies that compliance with U.S. law is non-negotiable.
As said by U.S. Secretary of the Treasury Janet L. Yellen, “Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.” This is a strong statement that even foreign companies like the Canadian-located Binance are accountable to follow U.S. law when operating here.