On November 21, the Department of Justice (DOJ) announced Binance Holdings Limited, the operator of the world’s largest cryptocurrency exchange, Binance.com, pleaded guilty to Anti-Money Laundering (AML) violations, unlicensed money transmitting, and sanctions breaches. This guilty plea is part of a resolution with the DOJ and other regulatory bodies, resulting in an unprecedented $4 billion settlement—one of the largest corporate penalties ever.
According to the DOJ, the charges against Binance related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA). Significantly, Changpeng Zhao, Binance’s founder and CEO, also pleaded guilty to failing to maintain an effective AML program and has resigned from his position.
According to the DOJ, Binance openly acknowledged prioritizing growth and profits over compliance with U.S. law. Established in 2017, Binance targeted high-volume customers, primarily from the United States, contributing to its position at the forefront of the cryptocurrency exchange system. Serving U.S. customers required Binance to register with FinCEN as a money services business and to implement a reasonably effective AML program to prevent Binance from being used to facilitate money laundering. According to the government, Binance did not do this and “chose not to comply with U.S. law and failed to implement controls and procedures to prevent money laundering.” While Binance did publicly announce the blocking of U.S. customers in 2019 and the launch of a separate U.S. exchange (Binance.US), it allegedly continued to maintain a substantial U.S. customer base, concentrating on valuable “VIP” customers.
Furthermore, internal Binance communications revealed an absence of proper protocols for flagging and reporting money laundering risks. Also at issue was a lack of controls to prevent U.S. users from trading with individuals in sanctioned jurisdictions, such as Iran. This purportedly resulted in over $898 million in trades between U.S. users and those residing in Iran between January 2018 and May 2022, in violation of federal law.
The plea agreement mandates Binance to forfeit over $2.5 billion and pay a criminal fine of $1.8 billion, totaling over $4.3 billion. In addition, Binance is required to retain an independent compliance monitor for three years and enhance AML and sanctions compliance programs. While Binance did not make a “timely and voluntary disclosure of wrongdoing” by the DOJ’s standard, cooperation with the investigation garnered partial credit, resulting in a 20% reduction in the fine. The company has also reached agreements with the CFTC, FinCEN, and OFAC, with approximately $1.8 billion credited toward those resolutions.
This unprecedented settlement underscores the importance of proactive compliance strategies and the need to navigating regulatory intricacies. The attorneys at Chilivis Grubman represent clients of all sizes in connection with government investigations and enforcement actions. If you need assistance with such a matter, please contact us today.