Binance crypto exchange tightens money laundering controls as regulatory pressure increases

FRANKFURT, Aug. 20 (Reuters) – Cryptocurrency exchange Binance said on Friday it will demand stricter client background checks to bolster efforts against money laundering, with immediate effect, a move that comes after weeks of pressure from regulators around the world.

Binance, the world’s largest crypto platform, has faced warnings and trade restrictions from financial watchdogs across Britain and Germany in Japan, who are concerned about the use of crypto in money laundering and consumer risk.

The exchange, whose holding company is registered in the Cayman Islands, has reduced its product offering and said it wants to improve its relationship with regulators.

U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde were among those voicing concerns about crypto money laundering this year, with other regulators growing concerned about Binance in particular. .

The Dutch central bank said on Monday that the platform, which processed cash transactions worth $ 455 million in July, was not in compliance with its anti-money laundering and financing laws. terrorism.

Binance users will need to complete a verification process to access its products and services, he said on his website. Those who have not done so will only be able to withdraw funds, cancel orders and close positions.

This move represents a major change for Binance.

Until now, it only requested identity checks for users looking for higher trading limits. Now users have to provide an ID card, driver’s license or passport, he said.

Standards vary depending on the stock exchange. Many large platforms, including Coinbase Global Inc (COIN.O) and Gemini, also require users to submit identity documents, but Kraken, another US exchange, only requires personal information for access. limited to transactions.

KNOW YOUR CUSTOMER

Binance CEO Changpeng Zhao, a Canadian known by his nickname “CZ,” said in a tweet linked to the Binance announcement that “actions speak more than words”.

“We aim to work more collaboratively with policy makers to improve global standards and deter bad actors,” he added in a separate statement.

Binance said this week that it had appointed a former U.S. Treasury criminal investigator as the global head of money laundering reports.

Still, some lawyers were skeptical whether Friday’s decision to tighten controls would appease regulators.

Financial watchdogs would need to know which local Binance entities are performing the know-your-client process to audit and verify if it complies with local laws, said Alireza Siadat, partner at Annerton law firm in Frankfurt.

“It’s a nice marketing statement, but from a regulator’s point of view, it’s not enough,” he said.

“As they do it on a voluntary basis, regulators don’t know if they have the power to oversee identity checks, and no one can verify if they are doing it correctly.”

Binance’s corporate structure is opaque despite its holding company being registered in the Cayman Islands, according to UK court documents and Malaysia’s securities watchdog.

Reporting by Krisztian Sandor in Frankfurt and Tom Wilson in London; written by Tom Wilson Editing by Rachel Armstrong and Elaine Hardcastle

Our Standards: Thomson Reuters Trust Principles.