Simple error or dangerous laxity? Binance crypto exchange under pressure

Despite a historic agreement with US authorities in 2023 and strict commitments in the fight against money laundering, Binance reportedly failed to block suspicious accounts. These accounts transferred colossal sums, raising serious questions about the real effectiveness of the controls put in place.

Gaping flaws in the surveillance system

In November 2023, Binance agreed to pay a record fine of $4.368 billion for violating banking secrecy laws and US sanctions.

This agreement prompted the resignation of Changpeng Zhao, its emblematic CEO, and imposed draconian five-year surveillance on the platform by the Financial Crimes Enforcement Network (FinCEN). The goal was clear: to transform Binance into an irreproachable player in regulatory compliance.

Yet, internal documents leaked to the Financial Times tell a very different story. Thirteen suspicious accounts allegedly continued their activities unimpeded after November 2023.

Among them, that of a 25-year-old Venezuelan woman who received over $177 million in crypto between April 2022 and 2024. This account changed its bank details no less than 647 times in fifteen months, using 496 different accounts spread across the Americas. A behavior that should have triggered all alarms.

Another case stands out: a 30-year-old Venezuelan bank employee whose account processed $93 million. Login logs reveal connections in Caracas at 3:56 p.m., then in Japan seven hours later. A physical impossibility suggesting either account sharing or the use of virtual private networks to mask the true origin of transactions.

Binance, between defense and enhanced surveillance

Financial flow analysis reveals even more concerning connections. Between February 2022 and March 2023, these 13 accounts collectively received $29 million in USDT from wallets later frozen by Israel for links to terrorism financing. 

The bulk of these funds came from four wallets associated with Syrian Tawfiq Al-Law, accused of transferring illicit sums for Hezbollah, the Houthis in Yemen, and entities linked to the Assad regime.

These wallets were seized by Israel in May 2023, several months before the Binance-US agreement. The OFAC (Office of Foreign Assets Control) subsequently sanctioned Al-Law in March 2024. 

Binance emphasizes that it “evaluates transactions based on information available at the time they occur” and that none of the wallets were officially on sanction lists during the mentioned transfers.

The platform claims to have “robust systems to identify and examine suspicious transactions.” It insists that it operates under the supervision of an independent regulatory body since November 2023 and complies with all applicable financial sanctions. Binance categorically rejects the Financial Times’ portrayal, arguing the report distorts the reality of its compliance efforts.

In summary, non-compliance with the agreement could be costly for Binance: an additional $150 million fine hangs over the platform. For an exchange that dominates the global market with more than half of the trading volumes, these revelations tarnish an already tarnished reputation.