Binance is not the cryptocurrency exchange it once was and no longer deserves to have its name tarnished, argues the company’s Head of Global Sanctions Chagri Poyraz.
Instead, the world’s largest crypto trading platform has made major strides in reining in illegal activity and the offering of services to terrorists and criminals, Poyraz said in an exclusive interview with The Block, adding that this shift has, in part, been achieved by Binance increasing the number of employees dedicated to compliance by 650% during the last two years.
The number of full-time compliance personnel has risen to roughly 750 staffers, up from 100 in 2021, said Poyraz.
Binance and the company’s vocal CEO Changpeng "CZ" Zhao have for some time been the subject of public and regulatory scrutiny, viewed by many as a nationless corporation engaged in the harboring of illicit funds. Having no official headquarters has also made it harder to regulate Binance, which processes tens of billions of dollars a day and has said it services more than 120 million users.
Using Binance for 'crime'
U.S. authorities recently moved to penalize Binance when the Commodity Futures Trading Commission filed suit against Binance and Zhao for allegedly doing business in the U.S. without permission. The CFTC also alleges Binance has helped terrorists and money launderers move funds.
The CFTC’s claims date back as far as 2017 while also bringing attention to internal communications from 2019 and 2020 which appear to indicate Binance knowingly offered services to international criminals. In its complaint, the CFTC said that Zhao and Binance’s former Chief Compliance Officer Samuel Lim took steps "to help customers evade Binance’s access controls.”
In a 2020 chat, Lim allegedly said: “Like come on. They are here for crime," to which a money laundering reporting officer replied, “we see the bad, but we close 2 eyes.”
The U.S. Justice Department is also investigating Binance for money laundering. Binance has also, in the last two years, upset regulators in other countries such as the U.K., Germany and the Netherlands.
Meanwhile, in recent years, Binance has hired several veterans of financial regulation, compliance and criminal investigation. Whether or not the company, now armed with a host professionals experienced in compliance, can turn the page and earn the confidence of international and national regulators remains to be seen.
New era in compliance and KYC?
But Binance is working hard to eliminate lapses in compliance and cast the company in a new light, argued Poyraz, who joined the company at the beginning of 2022. The company has added new staff whose full-time job it is to weed out terrorists and criminals and fortify the company’s know-your-customer (KYC) controls, according to Poyraz.
The company is committed, he added, to being transparent and avoiding running afoul of international bodies like the United Nations and European Union or the U.S.
“From a global perspective, Binance follows all UN sanctions, EU sanctions and U.S. sanctions despite the fact we do not operate in the U.S.,” said Poyraz, who has more than a decade of experience working in compliance and anti-money laundering for both the United Nations and HSBC.
In 2019, Binance set up a separate entity that caters to Americans called Binance.US. The larger, overseas version of Binance has repeatedly said the two entities operate separately.
Technology and tools
Poyraz also said that Binance has ramped up its development of technology tools to detect when people are trying to access the exchange illegally, including users based in sanctioned countries, sanctioned individuals and Americans trying to use Binance’s global platform rather than the U.S. regulated entity.
“From the middle of last year we started to invest considerably in our technology,” said Poyraz. “Because we invest so much in technology … we are able to detect more and more.”
The company’s Head of Financial Crime Compliance Tigran Gambaryan said that while financial institutions are generally “reactive,” at Binance he’s witnessed the reverse to be sometimes true.
“We took action against exchanges. We offboarded the largest exchange in Russia, Garantex, before OFAC even sanctioned them,” said Gambaryan, adding that his main focus is tracking down large entities which are trying to use Binance to conduct illicit activity. OFAC stands for the U.S. Office of Foreign Assets Control.
Lack of regulation 'frustrating'
For his part, Poyraz wishes the U.S. could be more proactive than it has been up to this point when it comes to cryptocurrency. “The lack of regulation is frustrating. I’m a compliance professional and for me not having regulation, not having guidance is frustrating,” he said. “Seeing [U.S. regulators] having those debates if crypto is a commodity or a security … is frustrating.”
Ultimately, Poyraz said he’s aware there will always be work to be done as factors like international sanctions and technological advancements are forever evolving. But he believes Binance has come a long way in the roughly year and a half since he joined.
“More acknowledgment from the U.S. or any other regulator would be nice because we are always active,” he said. “But there isn’t much recognition of that.”
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