* Binance to bring in stricter background checks
* Changes introduced with immediate effect
* Pressure from regulators has grown in recent weeks
FRANKFURT, Aug 20 (Reuters) – Cryptocurrency exchange
Binance said on Friday it would demand stricter background
checks on customers to bolster efforts against money laundering,
with immediate effect, a move that comes after weeks of pressure
by regulators globally.
Binance, the world’s biggest crypto platform, has faced
warnings and business curbs from financial watchdogs from
Britain and Germany to Japan, who are concerned over the use of
crypto in money laundering and risks to consumers.
The exchange, whose holding company is registered in the
Cayman Islands, has scaled back its product offerings and said
it wants to improve relations with regulators.
U.S. Treasury Secretary Janet Yellen and European Central
Bank President Christine Lagarde were among those this year to
voice concerns over crypto money laundering, with other
regulators growing concerned with Binance in particular.
The Dutch central bank on Monday said the platform, which
processed spot trades worth $455 million in July, was not in
compliance with its anti-money laundering and anti-terrorist
financing laws.
Binance users will have to complete a verification process
to access its products and services, it said on its website.
Those who have not done so will only be able to withdraw funds,
cancel orders and close positions.
The move represents a major shift by Binance.
Until now, it only asked for ID checks for users seeking
higher limits on trading. Now, users must provide an ID card,
driver’s licence or passport, it said.
Standards vary across exchanges. Many large platforms,
including Coinbase Global Inc and Gemini, also require
users to submit ID documents, yet Kraken, another U.S. exchange,
only requires personal information for limited access to trades.
KNOW-YOUR-CUSTOMER
Binance CEO Changpeng Zhao, a Canadian known by his nickname
“CZ,” said in a tweet linking to the Binance announcement https://twitter.com/cz_binance/status/1428614958846148609
that “actions speak louder than words”.
“We aim to work more collaboratively with policy-makers to
improve global standards and discourage bad actors,” he added in
a separate statement.
Binance said this week it had appointed a former U.S.
Treasury criminal investigator as its global money laundering
reporting officer.
Still, some lawyers were sceptical over whether Friday’s
move to tighten checks would placate regulators.
Financial watchdogs would need to know which of Binances
local entities run the know-your-customer process to audit and
check if it complies with local laws, said Alireza Siadat,
partner at law firm Annerton in Frankfurt.
“It is a nice marketing statement, but from the regulators’
perspective, this is not enough,” he said.
“Since they are doing it on a voluntarily basis, regulators
do not know whether they have the authority to supervise the
identity check, and no one can look whether they are doing it
properly.”
Binance’s corporate structure is opaque though its holding
company is registered in the Cayman Islands, according to
British court documents and Malaysia’s securities watchdog.
(Reporting by Krisztian Sandor in Frankfurt and Tom Wilson in
London; writing by Tom Wilson
Editing by Rachel Armstrong and Elaine Hardcastle)