In a significant development for the cryptocurrency exchange Binance, the United States Department of Justice (DOJ) has appointed Forensic Risk Alliance (FRA) to oversee its operations as an external monitor. This decision comes as part of a plea deal reached with the DOJ, which includes a three-year monitorship following allegations of money laundering.
FRA, a London-based firm known for its expertise in forensic accounting and compliance consulting, was selected over New York City’s Sullivan & Cromwell. The latter is a firm offering extensive services in bank regulation, digital assets, economic sanctions, and financial crimes. This appointment marks a crucial step in ensuring Binance adheres to legal standards and boosts transparency within its operations.
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Monitorship Aims to Increase Compliance and Transparency
The role of FRA will involve rigorous scrutiny of Binance’s adherence to legal and regulatory frameworks. This monitorship is expected to be demanding and consume considerable of Binance’s internal resources. However, it is seen as a necessary measure to restore trust and potentially facilitate the firm’s re-entry into markets from which it had previously been excluded.
According to analysts, the intensive nature of this monitorship could place significant pressure on Binance’s operations. Nonetheless, it presents an opportunity for the cryptocurrency exchange to align more closely with regulatory expectations and improve its operational transparency. The expectation from this oversight is a more compliant and stable platform, deemed crucial for its future growth and acceptance in global financial markets.
Legal Challenges for Binance
In November 2023, Binance was fined $4 billion as part of a plea agreement with the DOJ, concluding investigations that might have otherwise severely impacted its operations. As part of the agreement, Changpeng ‘CZ’ Zhao, Binance’s CEO, stepped down and was fined $50 million. He also pled guilty to charges including violations of the Bank Secrecy Act and operating an unlicensed money-transmitting business, resulting in a four-month jail sentence.
Adding to its challenges, Binance was fined approximately CAD 6 million (USD 4.4 million) by the Canadian financial regulator FINTRAC on May 9, 2024, for alleged breaches in money laundering regulations. These series of legal setbacks underscore the heightened scrutiny facing Binance and other cryptocurrency exchanges globally.
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