According to Reuters, US authorities are investigating whether Binance violated the Bank Secrecy Act after federal prosecutors began investigating the company and its CEO in December 2020.
According to the report, the Justice Department’s money laundering unit asked the world’s largest crypto exchange nearly two years ago to hand over messages from CEO Changpeng Zhao and other executives on topics such as its detection of illegal transactions and US customer recruitment.
The 2020 letter reportedly made nearly 30 requests for documents, including details of Binance’s anti-illegal finance policies and reports of suspicious financial activity filed with authorities, among other things.
The Bank Secrecy Act, enacted in 1970, established program, recordkeeping, and reporting requirements for national banks, federal savings associations, federal branches, and foreign bank agencies, with a focus on combating money laundering.
Crypto exchanges are also subject to the Bank Secrecy Act. According to Reuters, while Binance.US registered with the US Treasury Department in 2019, Binance’s flagship platform did not.
More than 500 people work on the company’s global security and compliance team, which includes former regulators and law enforcement officers.
”As has been well documented, regulators across the globe are reaching out to every major crypto exchange to better understand our industry,” the representative added. “We work with agencies regularly to address any outstanding questions.”
The spokesperson would not say whether the company is being probed for violating the Bank Secrecy Act.
While Binance is said to be dealing with its own Bank Secrecy Act investigation, notable executives at cryptocurrency derivatives exchange BitMEX has already been sentenced for violations.
Arthur Hayes and Ben Delo, co-founders of BitMEX, admitted guilt in February. The duo was ordered to pay $10 million each as part of the plea agreement for their roles in “willfully failing” to implement and maintain anti-money laundering measures at BitMEX.
The following month, another co-founder, Samuel Reed, pleaded guilty to the same charge and agreed to pay a $10 million fine. Earlier this month, BitMEX’s head of business development, Gregory Dwyer, pleaded guilty to a similar violation of the Bank Secrecy Act. He agreed to pay a $150,000 fine and could be imprisoned for up to five years.
Hayes was sentenced to six months of house arrest followed by two years of probation, Delo to 30 months of probation, and Reed to 18 months of probation.
In the absence of concrete crypto legal frameworks, industry executives and lawyers will continue to regulate by enforcement. The Reuters report came two days after US Rep. Raja Krishnamoorthi, D-Ill., requested information on four federal agencies and five cryptocurrency exchanges, including Binance, to combat fraud and scams.
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