CNBC has released an investigative piece on Binance citing allegations of allowing its Chinese customers to override the country’s cryptocurrency trading ban.
According to the article, Binance staff and volunteers have taught others how to trick the exchange’s know your customer (KYC), residency, and verification processes and how to get a Binance debit card by lying about where they live.
These disclosures cast doubt on the efficacy of Binance’s anti-money laundering (AML) efforts, and experts have voiced concern that the exchange’s lax enforcement of KYC guidelines may have consequences beyond China.
Chinese customers using proxy servers to bypass crypto restrictions
The exchange has seen a steady flow of Chinese customers looking for ways to circumvent China’s ban on cryptocurrency trading. According to the study, customers from China and other countries routinely circumvent Binance’s regulations by using a proxy server to disguise their location.
Messages from Binance’s official Chinese-language chatrooms signified that workers and volunteers spelled out techniques that involved faking bank documents or offering incorrect addresses and manipulating Binance’s systems.
As cryptocurrency exchanges have been illegal in China since 2017 and crypto itself will be illegal in 2021, Binance’s Chinese customers run a significant risk using these methods. The items that Chinese citizens desire access to are likewise unlawful under Chinese law.
Terrorists could take advantage of it
Binance’s KYC and AML efforts are suspect because of the techniques customers share. For international businesses like Binance, KYC, and AML initiatives are essential to guarantee customers aren’t participating in illicit activities like terrorism or fraud.
Terrorists, criminals, money launderers, cyber people in North Korea, Russian billionaires, etc., might utilize this to access this infrastructure, according to Sultan Meghji, a professor at Duke University and former top innovation officer at the federal deposit insurance corporation (FDIC).
Meanwhile, Jim Richards, an executive at Wells Fargo’s anti-money-laundering unit, raised concerns about the potential impact of the methods used to circumvent Binance’s KYC controls outside of China.
When reached for a response, a Binance spokesman informed CNBC that they had taken action against workers who may have broken its internal procedures, including inappropriately soliciting or offering suggestions that are not authorized or in accordance with their standards.
The spokesperson also added that Binance, who have recently made bold moves regarding sanctions in Russia, forbids employees from suggesting or supporting users in circumventing their local laws and regulatory policies. They would be immediately dismissed or audited if found to have violated those policies.
In conclusion, Binance’s apparent lack of enforcement of KYC guidelines and its employees’ and volunteers’ support for users to circumvent local laws and regulatory policies raise serious concerns about the exchange’s ability to prevent illegal activities.
The report also stresses the importance of international companies like Binance implementing more stringent KYC and AML measures to ensure they fully comply with local regulations.