CNBC recently revealed the results of its investigation. There is evidence that Binance staff have been actively assisting Chinese users in getting around the country’s strict regulations on cryptocurrency.
The research team went through messages from Discord Servers and Telegram Groups connected to Binance, the world’s largest digital asset exchange by volume and market capitalization.
While Binance rejected allegations that it was still serving Chinese customers after the 2021 ban, messages from Chinese-language chatrooms showed users finding clever ways to bypass the platform’s Know Your Customer (KYC) process, where they can hide their true country of residence.
Ingenious methods such as forging bank documents, concocting fake addresses and exploiting Binance system loopholes were discussed, and it was Binance employees who were credited for these ideas.
Remarkably, Binance personnel and volunteers known as ‘Angels” allegedly provided video tutorials and documents to teach users how to alter their country of origin in order to use the Binance debit card and convert their crypto assets into a traditional bank account.
Bypassing KYC/AML Could Put National Security at Risk
These discoveries raise serious questions about Binance’s KYC and Anti-Money Laundering (AML) efforts.
Sultan Meghji, a Duke University professor and former chief innovation officer of the FDIC, voiced his worries to CNBC.
“If I had an eight out of 10 worry about Binance from a regulatory perspective and from a national security point of view, this takes it to a 10 out of 10,” said Meghji. The academic mentioned how lawbreakers such as terrorists and money launderers may benefit from these methods.
In contrast, Binance founder Changpeng ‘CZ’ Zhao praised the exchange’s KYC and sophisticated VPN detection systems as a billion-dollar endeavor.
A Binance representative stated that employees are “explicitly prohibited from advising or aiding users in circumventing their local laws and regulatory policies,” and that any violations can lead to instant dismissal or audit.
How Are Customers Skirting Binance?
Binance has barred Chinese mobile phone registrations and blocked Chinese IP addresses from early 2021.
However, the investigation discovered that VPNs can be employed to mask users’ locations and weaken the security of the web. Chinese firewall.
Users were advised to register as Taiwanese citizens and then switch their nationality back to Chinese. It is also suggested to avoid VPN nodes based in the USA, Singapore and Hong Kong to prevent potential restrictions for domestic projects.
Another uncovered service was a mirror platform hosted on a website operated by Chinese tech giant Tencent. This looks to be assisting in onboarding Chinese customers, who can use domestic numbers for their calls, although Binance denies this.
Additional tips include registering email hosts from crypto-friendly countries, establishing offshore companies for KYC purposes and obtaining digital IDs from Palau with remote mail forwarding addresses from Austria. This can be used with bank statements created using PDF editors.
The investigation also exposed Telegram services offering to fabricate financial documents to prove address. These may raise questions about the source of funds, with financial institutions possibly flagging funds from this source as suspicious.
These latest findings have sparked growing worries about Binance. Investors and regulators must be vigilant to ensure the integrity of the crypto ecosystem.
This news follows Coinbase’s recent SEC lawsuit, despite years of the agency’s involvement in ensuring best-practice compliance and clarification.