Full text of the U.S. Treasury Department: Reached the largest settlement in history with Binance for violations of U.S. anti-money laundering and other behaviors

Source: U.S. Treasury Department; Compiled by: Song Xue, Golden Finance
The U.S. Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), and the Internal Revenue Service Criminal Investigation (CI), has taken an unprecedented action to seize Binance Holdings Ltd. and its affiliates (collectively, Binance) for violations of U.S. anti-money laundering (AML) and sanctions laws that protect U.S. national security and the integrity of the international financial system. Binance is the world’s largest cryptocurrency exchange, responsible for approximately 60% of centralized cryptocurrency spot trading.
Today, Binance settled with FinCEN and OFAC for violations of the Bank Secrecy Act (BSA) and apparent violations of multiple sanctions programs. These violations included failure to implement a program to prevent and report suspicious transactions with terrorists, including Hamas’ Qassam Brigades, Palestinian Islamic Jihad (PIJ), al-Qaeda, and the Islamic State of Iraq and Syria (ISIS) — ransomware attackers, money launderers, and other criminals, as well as matching transactions between U.S. users and users in sanctioned jurisdictions such as Iran, North Korea, Syria, and the Crimea region of Ukraine. By failing to comply with its anti-money laundering and sanctions obligations, Binance enabled a range of illicit actors to trade freely on the platform. Today’s settlement is part of a global agreement that Binance reached simultaneously with the Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) to resolve related matters.
“Binance turned a blind eye to its legal obligations in pursuit of profits. Its willful failure allowed funds to flow through its platform to terrorists, cybercriminals, and child abusers,” said Treasury Secretary Janet L. Yellen. “Today’s historic penalties and regulation to ensure compliance with U.S. laws and regulations mark a milestone for the virtual currency industry. Any institution, regardless of location, that wants to benefit from the U.S. financial system must also play by the rules that protect us all from terrorists, foreign adversaries, and criminals, or face consequences.”
FinCEN’s settlement assessed a $3.4 billion civil penalty, imposed five years of surveillance, and required significant compliance commitments, including ensuring Binance fully exits the United States. OFAC’s settlement assessed a $968 million penalty and required Binance to comply with a number of stringent sanctions compliance obligations, including cooperating fully with regulators overseen by FinCEN. To ensure that Binance complies with the terms of the settlement (including not providing services to U.S. persons) and that the unlawful activity is addressed, the Treasury Department will retain access to Binance’s books, records, and systems for five years. Failure to meet these obligations could subject Binance to significant additional penalties, including a $150 million suspension penalty, which FinCEN would collect if Binance fails to comply with the required compliance commitments and surveillance terms.
The monitor will oversee necessary remedial actions to address Binance’s failure to comply with its anti-money laundering and sanctions obligations. The regulator will also conduct regular reviews and report its findings and recommendations to FinCEN, OFAC, and the CFTC to ensure Binance’s ongoing compliance with the terms of the settlement agreement.
Today’s unprecedented action underscores the Treasury Department’s commitment to promoting compliance in the virtual currency industry, including aggressive enforcement of anti-money laundering and sanctions laws. Treasury’s authority to enforce these laws is broad, covers a wide variety of misconduct, and applies to both U.S. persons and foreign persons. Regardless of where they are located, virtual currency exchanges and fintech companies should, like any other financial institution, ensure that they adopt a management commitment to compliance at the highest levels and effectively integrate risk-based programs and controls into their platforms and technologies from “day one.”
The Treasury Department worked closely with its counterparts at the Department of Justice, including the Criminal Division’s Money Laundering and Asset Recovery Section, the National Security Division’s Counterintelligence and Export Control Section, the U.S. Attorney’s Office for the Western District of Washington, and the Commodity Futures Trading Commission.
FinCEN Enforcement Actions
FinCEN reaches historic $3.4 billion settlement, the largest penalty in the history of the U.S. Treasury and FinCEN.
Binance admitted that it willfully operated as an unregistered money services business (MSB) while obscuring its ties to the United States and maintaining its most commercially significant U.S. customers.
Binance admitted that it willfully failed to establish, implement, and maintain an effective anti-money laundering program, which included failing to perform Know Your Customer (KYC) verification on a large number of users. This meant that Binance allowed a range of illegal actors to trade freely on the platform, thereby undermining the integrity of the financial system. FinCEN's investigation showed that Binance also failed to mitigate the risks of anonymity-enhanced cryptocurrencies that allow users to obscure information about the source and destination of transactions.
As an MSB, Binance is required to report suspicious transactions to FinCEN through Suspicious Activity Reports (SARs). FinCEN’s investigation revealed that Binance’s former chief compliance officer told staff that the CEO’s request was not to report such activity and that Binance had never filed any SARs with FinCEN. Due to poor controls, Binance intentionally failed to report more than 100,000 suspicious transactions it processed, including transactions involving terrorist organizations, ransomware, child sexual exploitation materials, fraud, and scams.
Terrorist Financing. Binance failed to report to FinCEN transactions related to terrorist organizations such as al-Qaeda, the Islamic State of Iraq and Syria (ISIS), Hamas’ Qassam Brigades, and the Palestinian Islamic Jihad (PIJ).
Ransomware. Despite being one of the largest recipients of ransomware proceeds and receiving millions of dollars in ransomware proceeds from attacks involving at least 24 different ransomware strains, Binance failed to report these transactions.
Child Sexual Abuse Material. Binance has never reported transactions with websites dedicated to the sale of child sexual abuse material, including Dark Scandal.
Darknet Markets, Scams, and Other Illegal Activity. Despite sending and receiving virtual asset proceeds from large-scale hacks, account takeovers, and darknet markets that trade illegal narcotics, counterfeit and fraud-related goods and services, and other illegal contraband, Binance has never reported any such transactions.
To fill gaps in reporting to law enforcement related to these and other types of illegal activity, Binance has agreed to conduct a retrospective to identify and report to FinCEN suspicious transactions that it processed but intentionally failed to report.
OFAC Enforcement Actions
OFAC’s historic action reflects the egregious nature of Binance’s conduct, the volume of its transactions, and the involvement of senior management. Between August 2017 and October 2022, Binance conducted more than 1.67 million virtual currency transactions between U.S. persons and sanctioned jurisdictions and blocked persons on its Binance.com platform.
As early as mid-2018, Binance knew or should have known that allowing such activity would result in sanctions violations. Despite this, Binance deliberately undermined and ineffectively implemented its own sanctions compliance controls. One way Binance did this was by advising users to use a technology protocol that would circumvent Binance’s own Virtual Private Network, a technology protocol that blocked access to users with Internet Protocol addresses from the United States and sanctioned jurisdictions. In doing so, Binance sought to retain its U.S. user base and the significant trading liquidity provided by U.S. users, while also keeping its customers away from sanctioned jurisdictions. Binance knew that, given the operation of its matching algorithm, maintaining two sets of users would inevitably result in trades being executed between users in the United States and sanctioned jurisdictions, thereby violating sanctions regulations. To maintain this activity, Binance executives, including the CEO, issued guidance that “appeared” to be compliant while deliberately allowing clearly noncompliant activity to continue.
Binance’s settlement is the largest in OFAC history, and if Binance materially breaches the compliance commitments outlined in the agreement, it could face further penalties of up to billions of dollars.
IRS-CI Contribution
CI agents led a criminal investigation into Binance and its founders that served as the basis for the criminal charges and civil penalties. Evidence collected during the investigation established that the company and its founders did not have an effective anti-money laundering program in place, that the company was not registered as a money transmitter as required by federal law, and that the company willfully violated U.S. sanctions related to the International Emergency Economic Powers Act.
CI is the criminal investigation arm of the IRS. For more than 100 years, CI agents have spent 100% of their time investigating tax and financial crimes, an approach that easily transfers to the digital realm, where they now follow the money trail of increasingly sophisticated cybercrime.
The agency has two cyber crime units — a Western Cyber ​​Crime Unit located in the Los Angeles Field Office and an Eastern Cyber ​​Crime Unit located in the Washington, D.C. Field Office — responsible for conducting cyber investigations. The Western Cyber ​​Crime Unit, along with the Cyber ​​and Forensic Services Section at CI Headquarters, played an integral role in the civil penalty announced Tuesday.