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Summary
- AUSTRAC has instructed Binance Australia to select external auditors within 28 days, citing “significant concerns” regarding its anti-money laundering protocols.
- The regulator pointed out inadequate assessments, “high staff turnover,” and poor local management oversight.
- This directive follows a series of regulatory actions, including a $5.1 million fine imposed on Kraken and warnings issued to Bitget.
Australia’s financial intelligence agency has mandated that the Australian division of the world’s largest cryptocurrency exchange appoint an independent auditor due to “serious concerns” regarding its crime prevention systems, which could potentially expose the platform to illicit financial activities.
AUSTRAC has directed Investbybit Pty Ltd, the Australian subsidiary of Binance Global, to undergo external evaluation after discovering significant deficiencies in its anti-money laundering and counter-terrorism financing measures.
The most recent AUSTRAC order allows Binance Australia 28 days to propose external auditors for regulatory consent.
This enforcement step represents yet another setback for Binance Australia, which has been grappling with increasing compliance pressures as regulators crack down on crypto businesses that do not adhere to local requirements.
In December, ASIC penalized Kraken’s local operator $5.1 million for illegal margin trading, and last month it issued warnings to Bitget for offering unlicensed leveraged futures products.
“Major global firms may seem well-equipped to comply with complex regulatory standards, but if they lack understanding of local money laundering and terrorism financing hazards, they are failing to fulfill their AML/CTF responsibilities in Australia,” stated AUSTRAC CEO Brendan Thomas.
The agency noted concerning discoveries, including an insufficient independent review that did not align with Binance’s scale and associated risks.
“High staff turnover” and a lack of local management oversight also raised concern regarding the platform’s governance framework.
“Companies must fully utilize independent reviews and ensure rigorous testing and evaluation across critical processes and controls,” Thomas emphasized, calling for improved diligence from large international exchanges operating in high-risk settings.
Binance’s issues in Australia date back to February 2023, when it acknowledged misclassifying 500 retail clients as wholesale investors, prompting investigations from ASIC.
Last December, ASIC initiated legal action alleging that the platform deprived over 500 clients, representing 83% of its Australian customer base, of critical consumer protections between July 2022 and April 2023.
The exchange provided compensation of around $13 million to affected clients in 2023.
Subsequently, ASIC revoked Binance Australia Derivatives’ operating license in April following a focused review, with Deputy Chair Sarah Court describing the platform’s compliance systems as “grossly inadequate.”
Thomas cautioned that “capacity and risk controls must match the business size and its market share, especially as it expands.”
“The ongoing governance challenges faced by Binance in Australia, ranging from AML/CTF shortcomings to client misclassification, underscore the urgent need for crypto exchanges to establish strong, localized compliance structures,” stated Mohit Agadi, founder of Fact Protocol, to Decrypt.
“Given AUSTRAC’s findings, investors should confirm that their service providers adhere to local compliance regulations and remain alert to the evolving legislative landscape regarding digital assets,” he advised.
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