Binance Australia faces watchdog audit over AML concerns

AUSTRAC has directed the world’s largest centralized crypto exchange, Binance Australia, to conduct audits on its platform. Australia’s financial watchdog cited anti-money laundering and counter terrorism financing concerns.

The AUSTRAC-registered digital currency exchange provider, Investbybit Pty Ltd, was instructed to appoint an external auditor to conduct the audit. The watchdog gave Binance 28 days to nominate external auditors for consideration and selection.

AUSTRAC cites a surge in criminal activity involving digital assets

AUSTRAC CEO, Brendan Thomas, maintained that the agency’s National Risk Assessment 2024 highlights the surge in criminal abuse of digital assets. He added that the initiative against Binance follows regulatory engagement across the priority sector.

Thomas mentioned that AUSTRAC is committed to working with the crypto industry to ensure strong safeguards that make it hard for criminals to move and conceal illicit funds using virtual assets. He stressed that businesses need to reflect Australia’s regulatory requirements since they can have systems and processes that apply to multiple jurisdictions.

“Big global operators may appear well resourced and positioned to meet complex regulatory requirements, but if they don’t understand local money laundering and terrorism financing risks, they are failing to meet their AML/CTF obligations in Australia.”

–Brendan Thomas, CEO of AUSTRAC.

Thomas argued that crypto companies need to adapt to Australia’s regulatory requirements and not vice versa. He also stated that firms must understand specific risks of criminality in the Australian context. He believes it will ensure companies meet their reporting obligations in the country.

AUSTRAC raised Binance’s AML/CTF concerns partly due to the exchange’s latest independent review. The agency argued that the crypto exchange’s review was limited in scope relative to its size, business offerings, and risks.

Thomas urged that companies maximize the value of independent reviews and ensure thorough testing and review across critical controls. He also urged businesses to seek and expect a level of rigor and challenge when conducting independent reviews.

Australia’s financial watchdog also raised issues regarding Binance’s high staff turnover, lack of local resourcing, and senior management oversight. It said that those concerns raised questions about the adequacy of the exchange’s AML/CTF governance.

AUSTRAC expects robust customer identification, due diligence, and effective transaction monitoring on global crypto exchanges operating across borders. Thomas also reminded businesses to remain alert to suspicious transactions, including money laundering through scams, cybercrime, and terrorism financing. 

Paxos enters $48.5M settlement with the U.S. over deficiencies with Binance’s AML risk

The U.S. Department of Financial Services ordered Paxos Trust to pay a $26.5 million penalty for failures in its anti-money laundering program with its former partner, Binance. As previously reported by Cryptopolitan, the agency also announced that Paxos agreed to invest an additional $22 million in its compliance program.

New York State Department of Financial Services Superintendent Adrienne A. Harris said on August 7 that regulated entities must maintain appropriate risk management frameworks corresponding to their business risks. The agency argued that Paxos failed to include appropriate measures to monitor for illicit activity occurring at Binance effectively. It also said the firm failed to raise red flags with Paxo’s senior management and board.

The DFS found that around $1.6 billion in Binance transactions between 2017 and 20222 involved illicit actors. It also revealed that the crypto exchange had processed transactions to and from companies after the U.S. Office of Foreign Assets Control sanctioned them.

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