Binance tightens controls to fight money laundering after regulatory pressure

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Major cryptocurrency exchange Binance said Friday it would be calling for stricter background checks on customers with immediate effect to aid anti-money laundering efforts.

Binance, the world’s largest platform, has come under pressure for the past few months from regulators around the world who are concerned about crypto’s potential for money laundering and the risks to consumers from volatile crypto trading.

The exchange, whose holding company is registered in the Cayman Islands, has reduced its product offerings, including leveraged trading and tokens linked to stocks, and announced that it intends to improve relations with regulators.

The money laundering potential of cryptocurrency exchanges has long troubled regulators, including U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde, who raised concerns earlier this year.

The Dutch central bank said Monday that Binance had failed to comply with its anti-money laundering and terrorist financing laws.

Binance announced on their website that users would have to go through a verification process in order to access their products and services. Those who have not done so can only withdraw funds, cancel orders and close positions.

Until now, document-based ID checks at Binance were only required for users who wanted higher trading limits. Users will now need to upload an ID, driver’s license or passport to prove their identity, Binance said.

“This will further improve user protection and fight financial crime,” said the move.

Binance CEO Changpeng Zhao, a Canadian known by his nickname “CZ”, tweeted a link to the Binance announcement that said, “Actions speak louder than words”.

The steps taken by crypto exchanges to perform identity and background checks remain different, with some requiring full documentation and others allowing users to sign up for accounts with just one email address.

Binance’s spot trading volume was $ 455 million (roughly Rs 3,384 billion) in July, almost a third less than a month earlier, but still number 1 in the world according to data from CryptoCompare.

Binance’s corporate structure is opaque, despite the fact that the holding company is registered in the Cayman Islands according to UK court documents and the Malaysian Securities Commission.

© Thomson Reuters 2021

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