Binance, the world’s largest cryptocurrency exchange by volume, came under increasing global scrutiny in 2023 as regulators from multiple jurisdictions questioned the adequacy of its Anti-Money Laundering (AML) controls. The exchange faced investigations in the United States, United Kingdom, and several European countries, with particular focus on inadequate KYC processes, lack of jurisdictional licensing, and opaque corporate governance structures.

The case against Binance has become emblematic of the regulatory friction between traditional compliance frameworks and rapidly evolving digital asset platforms. Investigations revealed that Binance had allowed users to trade without undergoing robust identity verification, exposing the platform to risks from sanctioned entities and illicit actors. Regulators also criticized its decentralized operational model, which complicated jurisdictional accountability.

The scrutiny prompted Binance to undertake a broad compliance overhaul. The exchange hired former regulators and law enforcement officials, enhanced its AML software tools, and initiated efforts to acquire local licenses in key markets. It also began reporting suspicious activity to relevant authorities and made public commitments to align with the Financial Action Task Force (FATF) travel rule.

For other crypto companies, Binance’s experience is a cautionary tale about the importance of building a compliance infrastructure that is not only reactive but anticipatory. Firms should adopt global best practices, conduct regular third-party audits, and establish internal whistleblower protocols. As digital assets become mainstream, regulatory expectations will continue to rise, and firms must be prepared to operate under the same scrutiny as traditional financial institutions.

Source: SEC Files 13 Charges Against Binance Entities and Founder Changpeng Zhao
Image Source: Binance Blog: Binance turns 6