U.S. prosecutors have been probing Binance’s anti-money laundering compliance, operations, and internal communications since December 2020, Reuters reported on Sep. 1, citing people familiar with the investigation.
The report said the U.S. Justice Department sent the exchange a letter requesting the exchange to voluntarily provide records of communication involving founder Changpeng Zhao and 12 other executives and partners over the detection of illegal transactions and its acquisition of U.S.-based customers.
According to the report, prosecutors also requested company records that contained instructions to destroy files or transfer records outside the U.S.
The regulator requested information on Binance businesses in the U.S. It also asked for details of its anti-money laundering and sanctions compliance measures.
According to the report, the request was based on an investigation into the exchange’s compliance with the Bank Secrecy Act. The law requires crypto exchanges within the U.S. to register with the Treasury Department and comply with anti-money laundering measures.
Regulator questioned Binance.US rationale
Reuters reported that the Justice Department 2020 letter requested documents relating to the “business rationale” in establishing Binance.US.
The regulator reportedly asked Zhao and 12 other executives, including co-founder Yi He, and chief compliance officer, Samuel Lim, about the relationship between Binance and Binance.US.
Binance.US was launched in 2019 by Binance (the parent company) and is registered with the U.S. Treasury Department.
However, the parent company’s opaque structure has mystified regulators worldwide, who have warned users about the exchange several times.
Recently, the Dutch central bank fined the firm over €3 million for violating its financial laws.
SEC subpoenaed Binance.US operators
Reuters also revealed that the Securities and Exchange Commission (SEC) subpoenaed Binance.US’s operator, BAM Trading Services.
According to Reuters’ report, the subpoena inquired about services BAM provided for Binance.US and whether any employees also worked for the parent exchange.
Reuters could not determine how Binance responded to the regulator’s demands.
Meanwhile, Binance Chief Communications Officer Patrick Hillmann reportedly said:
“Regulators across the globe are reaching out to every major crypto exchange to better understand our industry. This is a standard process for any regulated organization and we work with agencies regularly to address any questions they may have.”
Hillmann added that the exchange had a compliance team staffed with former regulators and law enforcement agents.
Changpeng Zhao also tweeted that the exchange complied with the 2020 regulatory demands.
Another story today about a crypto company receiving an inquiry from a regulator. A request to VOLUNTARILY share certain information back in 2020, which we did. Important for the industry to build trust with regulators.
My chat messages are semi-public anyway. pic.twitter.com/h35Xd4tZhf
— CZ 🔶 Binance (@cz_binance) September 1, 2022