Employees said that because of the implementation of the verification procedure, the exchange lost billions of dollars

Binance lost 90% of customers after implementing KYC

01.08.2022 - 07:30


3 min

What’s new? The compliance team at cryptocurrency exchange Binance commented on a series of investigations by Reuters regarding the platform’s connection to illegal activity. Employees Tigran Gambaryan, Matthew Price, and Chagri Poyraz disputed a number of allegations, including claims that the exchange facilitates money laundering more than other platforms. What is more, they said, the company has suffered billions of dollars in losses as a result of implementing anti-financial crime measures. The employees told about this in an interview with CoinDesk.

CoinDesk’s material

KYC and AML procedures at Binance. According to a Reuters investigation, criminals have laundered more than $2,35 billion through Binance since 2017. Among them are hackers from the North Korean group Lazarus and individuals involved in the Russian darknet marketplace Hydra. Gambaryan said that because of the introduction of know your customer and anti-money laundering (KYC/AML) measures, the exchange lost 90% of consumers and billions of dollars of revenue. However, he noted that these procedures are necessary. In May, Binance strengthened KYC procedures to comply with sanctions restrictions

Last November, Binance CEO Changpeng Zhao reported that the exchange lost about 3% of customers after the KYC was implemented.

Binance’s connection to Hydra. Gambaryan and Price noted that Hydra “was humongous,” and it was impossible to control the money coming in. However, the exchange could take further action if criminal funds were discovered. Thus, KYC deters criminals from using exchanges that support such measures. If a criminal tries to use Binance, the transaction will be detected by monitoring. The staff added that criminals always choose the easiest and cheapest route, which is probably why they were attracted to Binance. Gamburyan and Price stressed that talking about Binance’s ties to Hydra is “like saying that Bank of America supports money laundering for drug cartels.”

How is Binance different from other platforms? The exchange conducted a study regarding illicit proceeds in relation to the total volume of exchange. The staff confirmed that such transactions take place, but that Binance “is better or the same as most exchanges <...> better than Kraken, better than Coinbase in some areas and worse in some areas. They attributed this to the fact that the platforms operate in different jurisdictions.

Binance and VPN. Reuters also stated that until September 2021, customers from Iran could use the exchange bypassing US sanctions in the absence of KYC and at the expense of a VPN. In response, Gambaryan said that no exchange blocks VPNs and their use is not a sign of criminal activity. He added, however, without going into detail, that VPN activity could be useful for investigations into the origin of funds.

Chagri Poyraz also commented on serving customers from Iran. From a sanctions perspective, he said, Iranian nationals living outside the country are not a problem for the US Office of Foreign Assets Control (OFAC). He explained that UN sanctions apply everywhere, while US restrictions apply only in accordance with US legislation and enforcement.

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