The world’s largest cryptocurrency trader was found to have processed trades with Iranian users despite U.S. sanctions, according to a media investigation.
Users in Iran used Binance up until at least September of last year, meaning the sanctions the United States reinstituted in 2018 were flouted, Reuters found in speaking with traders. Despite a company ban, senior employees were both aware and welcoming of the exchange’s popularity in Iran, with one commenting “IRAN BOYS” on an Instagram post detailing its popularity in Iran, the investigation showed.
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Binance has denied allegations of noncompliance. The Treasury Department did not respond to the Washington Examiner’s request for comment.
Binance is the undisputed leader of cryptocurrency trading, a $950 billion industry, operating nearly four times more markets than the next largest, FTX, according to CoinMarketCap. It processes over $10 billion in cryptocurrency trades per day and boasts 90 million registered users on its homepage.
The company is not based in the U.S., nor does it officially operate there, referring U.S. users to an exchange called Binance.us, which is run by the CEO of Binance. But although its headquarters is believed to be located in the Cayman Islands, it is still not exempt from secondary sanctions. Punishments for allowing services in Iran range from fines and reputation damage to being cut off from the U.S. financial system, according to lawyers who spoke with Reuters.
Failing to have proper sanction compliance procedures may result in punishment from U.S. regulatory agencies. In December 2020, the U.S. Office of Foreign Assets Control issued a $98,830 fine against BitGo, a U.S.-based company that deals with cryptocurrency, for such an infraction. In its enforcement release, the office said, “BitGo failed to exercise due caution or care for its sanctions compliance obligations when it failed to prevent persons apparently located in sanctioned jurisdictions to open accounts and send digital currencies via its platform as a result of a failure to implement appropriate, risk-based sanctions compliance controls.”
Concern had been raised about weaknesses in Binance’s compliance checks by senior employees and regulators, according to Reuters. The company instituted stronger compliance checks last year in response.
Binance claimed it has fully complied with the sanctions.
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“We have assembled a globally recognized compliance and regulatory program that has been our core objective over the past 18 months. … This industry-leading sanctions program is fully compliant with all international financial sanctions, including blocking platform access to users in Iran, North Korea, among many others. We have also implemented advanced detection tools that allowed us to further crackdown on users in sanctioned regions that had access to sophisticated masking tools including VPNs,” a Binance spokesperson wrote in an email to Gizmodo.
The Iranian government has used cryptocurrency and bitcoin mining in order to avoid Western sanctions, even licensing bitcoin miners for this purpose, according to Elliptic.
