French authorities have been investigating Binance for multiple alleged infractions since February 2022, according to a local news report. The Paris public prosecutor’s office told local media that the investigation against the largest crypto exchange is two-pronged.
First, authorities are looking into whether Binance solicited French users and thereby operated without a license in the country. Second, they are probing into “acts of aggravated money laundering, through participation in investment operations, concealment, conversion, the latter being carried out by perpetrators of offenses having generated profits.”
Aggravated money laundering refers to cases of systematic laundering or those that involve large amounts of laundered funds involving multiple launderers. Local media reported that authorities believe Binance failed to meet its know-your-customer (KYC) and anti-money laundering (AML) obligations.
It is worth noting that Binance did not implement compulsory KYC verification until August 2021.
Suspicions of illegal operations
Since 2019, crypto exchanges have been required to obtain a digital asset service provider (DASP) license and register with the Financial Markets Authority (FMA) to operate in France. Without the license and registration, crypto firms are not allowed to advertise their services to French consumers.
Binance became a fully regulated crypto exchange in France in May last year. However, the exchange has been offering services in the country since 2020, as per the local news report. Authorities likely suspect that Binance illegally advertised and promoted its services in the country to attract potential French users before it obtained its license.
Such suspicions echo the charges brought against the exchange by the U.S. Securities and Exchange Commission (SEC) earlier this month. In its lawsuit, the SEC alleged that Binance illegally solicited U.S. customers, commingled user and corporate funds, and failed to comply with anti-money laundering rules.
Binance is cooperating with authorities
A Binance spokesperson told CryptoSlate that the exchange is working closely with regulators to meet all compliance requirements. The spokesperson added:
“Binance invests considerable time and resources into cooperating with law enforcement globally. We abide by all laws in France, just as we do in every other market we operate. “
While the exchange declined to comment on ongoing investigations, the spokesperson said that Binance had an on-site visit by French authorities last week. Such visits by regulators and inspectors are part of the regulatory obligations of financial firms in the country, the spokesperson said.
The prosecutor’s office stated that the documents and computers collected during these searches of Binance premises will be the “subject of an in-depth study.”
The Binance spokesperson asserted that the exchange’s user information is held “securely and only provided to government officials upon receipt of documented appropriate justification.”
The news of the probe comes on the same day that Binance announced its withdrawal from the Netherlands after failing to secure a license.