OFAC Reaches Record Sanctions Settlement With Crypto Exchange Binance
The Office of Foreign Assets Control on Nov. 21 announced a $968 million settlement with Binance, the world’s largest virtual currency exchange, for allegedly violating multiple U.S. sanctions programs when the company allowed people who were either subject to sanctions or located in sanctioned jurisdictions to use its platform. OFAC said Binance senior management knew they were illegally allowing sanctioned users to access its online exchange platform and took steps to “undermine” the company’s own compliance procedures.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The settlement represents the largest civil sanctions penalty in OFAC’s history. Binance didn’t voluntarily disclose the violations, Treasury said, calling the case “egregious.”
The penalty was announced alongside a $3.4 billion settlement between Binance and the Financial Crimes Enforcement Network for violating the Bank Secrecy Act and a $1.8 billion criminal fine, DOJ announced. OFAC said it will waive around $900 million of its settlement amount as long as the company pays that amount to DOJ for “violations arising out of the same pattern of conduct during the same period of time.” The company also pleaded guilty to charges related to violations of the International Emergency Economic Powers Act, agreed to retain an independent multiyear compliance monitor and committed to improve its anti-money laundering and sanctions compliance programs.
Treasury Secretary Janet Yellen said Binance “turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.” She added that the “historic” penalties and monitorship “mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime, or face the consequences.”
OFAC said the sanctions violations took place between August 2017 and October 2022 when Binance “matched and executed” virtual currency trades through its online exchange platform between U.S. users and people either subject to sanctions or located in sanctioned jurisdictions. Although Binance had a compliance program in place, OFAC said the company didn’t effectively implement the controls, adding that senior management had more of an “interest in feigning compliance rather than addressing the company’s actual risk.”
The agency pointed to multiple instances in which Binance failed to address sanctions risks, including one case in 2019 in which an engineer “repeatedly alerted” a manager about the “continued presence of sanctioned jurisdiction users.” OFAC said that person wrote: “This is a bigger issue than you realize and we’ve kind of slacked on addressing this properly for quite some time.”
Despite this, Binance touted its “purported sanctions compliance controls to third parties in support of maintaining its banking relationships,” OFAC said. In 2018, a senior executive “misled” a financial institution by writing in a compliance form that Binance used internet protocol blocking to prohibit business from sanctioned countries, but OFAC said that “misrepresented Binance’s actual compliance procedures.” The agency also said the executive "communicated a commitment” to sanctions compliance “that did not in fact exist.”
As part of its settlement with OFAC, Binance agreed to maintain an independent compliance monitor for five years along with a host of other compliance commitments, including regular sanctions compliance training for employees, improved compliance controls and audits. The company for five years also must annually certify to OFAC that it's complying with the settlement.
If Binance breaches the settlement, OFAC may impose an additional penalty “up to the statutory maximum,” which in this case is more than $592 trillion.
OFAC pointed to several aggravating factors that led to the record settlement, including that Binance knew that its conduct likely constituted violations of U.S. law and that its matching engines were “routinely” matching U.S. users with users from sanctioned jurisdictions “over many years and at significant volumes.” Binance senior management also mischaracterized its sanctions controls, encouraged the use of virtual private networks, “surreptitiously allowed U.S. users and sanctioned jurisdiction users to trade even after ostensibly blocking them” and gave “economic benefit to a substantial number of” people in sanctioned territories. The agency also noted Binance was a “commercially sophisticated actor.”
The agency also pointed to several mitigating factors, including Binance’s lack of a penalty notice in the previous five years and its “substantial cooperation” with OFAC. Many of the sanctions violations “involved transactions for relatively small amounts,” the agency said, and Binance’s “operating income from such transactions represented a relatively small total.”
Binance said the settlement agreements "acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth." When it first launched, Binance "did not have compliance controls adequate for the company that it was quickly becoming, and it should have," it said. "Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way. Today, Binance takes responsibility for this past chapter."