When Binance agreed to a $4.3 billion settlement with the US Department of Justice (DoJ), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC), it agreed to allow two government agencies to appoint compliance monitors within the company.
As a result, Binance agreed to let the DoJ monitor its operations for three years and FinCEN for five.
After a lengthy bidding process, the DoJ picked Forensic Risk Alliance (FRA) to operate its monitorship while, according to Bloomberg, law firm Sullivan & Cromwell will likely fulfill FinCEN’s.
Never before in the history of Binance has such an expansive surveillance apparatus existed. Indeed, as the world’s largest crypto exchange and hub for tens of millions of crypto traders around the world, these DoJ and FinCEN monitorships are arguably the most powerful and comprehensive government surveillance operations in the history of crypto.
US crypto surveillance backend for almost all crypto trades
For the first time in crypto’s 15-year history, the US government has workers installed within the world’s largest operating crypto exchange. It’s a leap in surveillance by orders of magnitude. The increased power above its prior data sources — such as one-off historical subpoenas, widely neglected suspicious activity reports, or Chainalysis blockchain analytics — cannot be overstated.
According to Binance’s sworn settlement, it must provide FRA, as DoJ’s authorized contractor, access to “all information, documents, records, facilities, and employees, as reasonably requested,” including “direct observation of selected systems and procedures of the company, including those related to know-your-customer, customer due diligence, US sanctions screening, real-time transaction monitoring, law enforcement notifications, internal accounting controls, record-keeping, and internal audit procedures.”
Monitorships probably explain CZ’s prison getaway
Given the immeasurable quantities of data to which the US government now has access — including tens of millions of people and untold criminal acts by Binance users for the next five years — it’s somewhat unsurprising that its CEO Changpeng Zhao was able to get off with such a short prison sentence.
Like Binance the company, Zhao, its founder and CEO, also pleaded guilty to violating anti-money laundering laws. However, he received only a relatively short, four-month prison sentence.
Many observers attribute the judge’s leniency in Zhao’s prison sentence to the expansive, dual monitorships to which he agreed. For the first time, the US government has guaranteed, court-enforced oversight of Binance’s global operations. According to Dennis Kelleher speaking to Law360 reporters, the monitorship plea agreement made it “preordained that he was not going to get a very serious sentence.”
Read more: Binance founder Changpeng Zhao sentenced to 4 months in prison
All other crypto surveillance tools in distant second place
Binance is by far the world’s largest crypto exchange and for years, it has facilitated multiples of the transactions of any of its closest competitors. Therefore, from a crime-fighting perspective, these years of surveillance will prove invaluable for US law enforcement efforts against crypto-using criminals.
According to a commentator, “It means bad actors going forward need to be really careful with their operational security practices to make sure they don’t pull in funds from an address which was incidentally doxxed because of an interaction with Binance.”
Binance has not settled the SEC’s multi-billion dollar lawsuit — that litigation regarding unregistered securities continues — and the crypto giant also faces continued law enforcement abroad.
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