Binance has been asked to tighten its risk and compliance standards following on-site inspections from the French Prudential Supervision and Resolution Authority.
Summary
- French authorities have been conducting extensive compliance inspections on Binance, Coinhouse, and other registered crypto platforms to assess their anti-money laundering and counter-terrorism financing measures.
- The scrutiny adds to Binance’s long history of regulatory challenges, including past investigations in the U.S. and Australia over AML violations.
According to a recent Bloomberg report, French authorities have been carrying out control checks on Binance and dozens of other exchanges since late last year.
The effort was made to determine which of the crypto platforms registered as offering crypto services in the country may be granted European Union-wide permits in the coming months.
The compliance checks involve assessing the anti-money laundering and counter-terrorism financing standards implemented across hundreds of crypto asset service provider platforms in the European state.
The French supervisory authority, Autorité de Contrôle Prudentiel et de Résolution, has been inspecting local operations to verify compliance with its digital asset service provider registration framework, known as PSAN.
According to people familiar with the matter, Binance and Coinhouse are among the firms that French authorities are reviewing. As a result of the examinations, the agency officials reportedly told the world’s largest crypto exchange to tighten its compliance and risk controls.
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When asked about the inspection, Binance replied to Bloomberg saying that periodic inspections are a “standard part of the supervision of regulated entities.” Meanwhile, the ACPR and Coinhouse declined to comment on the review.
The inspections on crypto platforms come at a time when Europe is shifting to grant more centralized financial approval over the crypto market.
Last month, France, Austria, and Italy urged the EU’s market watchdog, European Securities and Markets Authority or ESMA, to start supervising major crypto companies directly and tighten the region’s rules.
Since then, the EU has been trying to implement blanket cross-border regulations and licensing regimes to keep the standards uniform across the different states.
Binance’s complicated history with compliance
In the past, Binance has had problems with local authorities regarding compliance standards and anti-money laundering measures. One of the main areas of concern has been the platform’s AML and Know Your Customer practices.
Regulators have accused the exchange of allowing users to trade and move funds without adequate identity checks, which could enable money laundering or terrorist financing.
Most recently, last August, Binance Australia came under scrutiny for its anti-money laundering and counter-terrorism financing systems. The Australian financial authority highlighted several concerns regarding Binance’s independent reviews, high staff turnover, and insufficient local senior management oversight.
The firm was given 28 days to nominate external auditors for AUSTRAC’s consideration and selection. The exchange must also implement stronger controls, including robust customer identification, thorough due diligence, and effective transaction monitoring within the determined timeframe.
In 2023, the U.S. Commodity Futures Trading Commission and the Department of Justice filed actions against Binance for alleged violations of anti-money laundering laws and operating an unregistered trading platform. This led to a $4.3 billion settlement, one of the largest in crypto history, and the resignation and imprisonment of founder Changpeng “CZ” Zhao.
In 2021, Binance left the Asian markets due to stricter compliance regulations. However it has since reentered the market by acquiring South Korea’s Gopax exchange. In July, when Singapore cracked down on unlicensed crypto platforms, the exchange was able to stay under the radar even without a license because its 400 employees based in Singapore only worked remotely while their base of operations remained overseas.
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