Cryptocurrency exchange Binance has agreed to pay $4.3bn to settle the US Department of Justice claims related to multiple criminal violations of the US anti-money laundering (AML) laws.
The US Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), and the IRS Criminal Investigation (CI), held Binance accountable for the violations.
The violations include failing to prevent and report suspicious transactions with terrorists, including Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda, and the Islamic State of Iraq and Syria (ISIS).
The list also includes ransomware attackers, money launderers, and other criminals, along with matching trades between US users and those in sanctioned territories such as Iran, North Korea, Syria, and the Crimea region of Ukraine.
Binance founder Changpeng Zhao pleaded guilty to willfully violating the Bank Secrecy Act and the International Emergency Economic Powers Act.
Zhao personally agreed to pay a $50m fine and step down from the CEO position. He will be replaced by former Abu Dhabi regulator and Binance regional markets head Richard Teng.
Secretary of the Treasury Janet Yellen said: “Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.
“Today’s historic penalties and monitorship to ensure compliance with US law and regulations mark a milestone for the virtual currency industry.
“Any institution, wherever located, that wants to reap the benefits of the US financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime, or face the consequences.”
Binance, as an unregistered money services business (MSB), was required to report suspicious transactions to FinCEN through suspicious activity reports (SARs).
FinCEN’s investigation found that Binance failed to mitigate the risks of anonymity-enhanced cryptocurrencies and allowed a range of anti-social elements to transact freely on the platform.
Binance never filed a single SAR with FinCEN, allowing more than 100,000 suspicious transactions involving terrorists, ransomware, child sexual exploitation, fraud, and scams.
Under the settlement agreement with FinCEN, Binance will pay $3.4bn in civil money penalty. The settlement requires significant compliance undertakings, including ensuring the company’s complete exit from the US.
It is one of the largest penalties ever imposed on a corporate defendant in the US. The settlement with OFAC entails a $968m penalty and imposition of sanctions compliance obligations, including full cooperation with the monitorship overseen by FinCEN.
The Treasury will have access to its books, records, and systems to ensure that the company fulfils the terms of its settlement, including not providing services to US citizens.
Binance may face additional penalties if it fails to comply with the terms of the required compliance undertakings and monitorship, including a $150m suspended penalty.