In brief
- Binance Australia has been instructed by AUSTRAC to appoint independent auditors within 28 days due to “significant concerns” regarding its anti-money laundering procedures.
- The regulatory body pointed out deficiencies in assessments, a “high rate of employee turnover,” and a lack of sufficient local managerial control at the exchange.
- This action follows other regulatory steps, such as a $5.1 million penalty against Kraken and cautions issued to Bitget.
Australia’s financial intelligence unit has mandated that the Australian division of the world’s leading cryptocurrency exchange secure an independent auditor. This decision stems from “serious reservations” about its safeguards against financial crime, which allegedly leave the platform susceptible to illicit financial activities.
AUSTRAC has ordered Investbybit Pty Ltd, the Australian arm of Binance Global, to undergo an external audit. This directive comes after the discovery of substantial weaknesses in the exchange’s controls designed to prevent money laundering and the financing of terrorism.
According to AUSTRAC’s instruction, Binance Australia has a 28-day window to nominate external auditors for regulatory validation.
This enforcement represents yet another regulatory setback for Binance Australia. The company has faced increasing compliance challenges as authorities intensify their scrutiny of crypto platforms that fail to adhere to local norms.
Back in December, ASIC imposed a $5.1 million penalty on Kraken’s Australian entity for illicit margin trading activities. Additionally, last month, ASIC issued a warning to Bitget for providing unlicensed leveraged futures products.
AUSTRAC CEO Brendan Thomas stated that while “large global operators might seem well-equipped to handle complex regulatory demands, a failure to grasp local money laundering and terrorism financing risks signifies a failure to meet AML/CTF obligations in Australia.”
The regulator specifically pointed to issues such as an inadequate independent review, one that did not align with Binance’s scale and risk profile.
According to the statement, “high employee turnover” coupled with insufficient local managerial oversight, raised further concerns regarding the platform’s overall governance.
Thomas emphasized that “businesses must maximize the benefit of independent reviews and ensure suitable testing and review processes are in place across crucial processes and controls.” He also demanded more diligence from major international exchanges operating in high-risk operational environments.
Binance’s challenges in Australia date back to February 2023, when the exchange acknowledged incorrectly categorizing 500 retail clients as wholesale investors, which triggered an investigation by ASIC.
Later, in December, ASIC commenced legal action against the platform, asserting that it had deprived over 500 customers, representing 83% of its Australian customer base, of fundamental consumer protections between July 2022 and April 2023.
The exchange provided approximately $13 million in compensation to affected customers during 2023.
Following a specific review, ASIC revoked Binance Australia Derivatives’ operating license in April, with Deputy Chair Sarah Court describing the platform’s compliance systems as “seriously inadequate.”
Thomas cautioned that “the capabilities and risk management controls of a business should be commensurate to its scale and market footprint, especially as it expands.”
According to Mohit Agadi, founder of Fact Protocol, “Binance’s ongoing governance problems in Australia, from AML/CTF shortcomings to customer misclassification, emphasizes the importance of robust, localized compliance frameworks for crypto exchanges.”
“Given AUSTRAC’s concerns, it is important for investors to ensure their providers are meeting local compliance standards and stay informed about the evolving rules governing digital assets,” he added.
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.