Binance has been asked to tighten its risk and compliance standards following an on-site inspection by the French Prudential Supervision and Insolvency Authority.
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- French authorities are carrying out extensive compliance checks on Binance, Coinhouse and other registered crypto platforms to assess their anti-money laundering and anti-terrorist financing practices.
- The scrutiny adds to Binance's long history of regulatory challenges, including previous investigations in the US and Australia over AML violations.
According to a recent report from Bloomberg, French authorities have been conducting administrative inspections of Binance and dozens of other exchanges since late last year.
The initiative was undertaken to determine which virtual currency platforms registered to provide virtual currency services in the country may be granted European Union-wide permission in the coming months.
Compliance checks include an assessment of anti-money laundering and anti-terrorist financing standards implemented on the platforms of hundreds of crypto asset service providers in European countries.
French supervisory authority Prudentiel Regulator is inspecting local operations to ensure compliance with the Registration Framework for Digital Asset Service Providers, known as PSAN.
Binance and Coinhouse are among the companies being reviewed by French authorities, the people said. As a result of the investigation, regulators have reportedly ordered the world's largest cryptocurrency exchange to strengthen compliance and risk management.
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Asked about inspections, Binance told Bloomberg that periodic inspections are “a standard part of the oversight of regulated entities.” Meanwhile, ACPR and Coinhouse declined to comment on the review.
The inspection of crypto platforms comes at a time when Europe is moving towards providing more centralized financial authorization for crypto markets.
Last month, France, Austria and Italy called on the EU's market watchdog, the European Securities and Markets Authority (ESMA), to start directly supervising large crypto companies and tighten rules within the region.
Since then, the EU has been trying to introduce a comprehensive cross-border regulation and licensing system to harmonize standards across countries.
Binance’s checkered compliance history
Binance has had issues with local governments in the past regarding compliance standards and anti-money laundering. One of the main areas of concern is the platform's AML and know-your-customer practices.
Regulators have accused the exchange of allowing users to trade and transfer funds without proper identity verification, potentially enabling money laundering and terrorist financing.
More recently, in August last year, Binance Australia came under scrutiny for its anti-money laundering and anti-terrorist financing systems. Australia's financial regulator highlighted several concerns about Binance's independent review, high staff turnover and inadequate oversight of local senior management.
The company had 28 days to appoint an external auditor for AUSTRAC's review and selection. Exchanges will also need to implement stronger controls, including robust customer identification within defined time frames, thorough due diligence, and effective trade monitoring.
In 2023, the U.S. Commodity Futures Trading Commission and the Department of Justice filed a lawsuit against Binance for violating anti-money laundering laws and operating an unregistered trading platform. This resulted in a $4.3 billion settlement, the largest in cryptocurrency history, and founder Changpeng “CZ” Zhao resigned and was jailed.
In 2021, Binance withdrew from the Asian market due to stricter compliance regulations. However, it later re-entered the market by acquiring South Korea's Gopax exchange. When Singapore cracked down on unlicensed crypto platforms in July, the exchange was able to fly under the radar without a license because its 400 Singapore-based employees only worked remotely and its operations were overseas.
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