In an important piece of crypto news, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has ordered an external audit of the Australian unit of crypto exchange giant Binance. The decision comes over concerns on the part of AUSTRAC about Binance’s counter-terrorist financing (CTF) and anti-money laundering (AML) systems.
AUSTRAC noted that their decision was made in the wake of “identifying serious concerns” as it relates to Binance’s CTF/AML controls. This just underscores what has been a difficult time for Binance since opening its Australia branch a few years ago.
Increasing Vulnerability of Digital Currencies
Binance Australia and New Zealand general manager Matt Poblocki said in a statement, “Binance Australia acknowledges AUSTRAC’s decision.” He later added that the move is “one of their supervisory review measures and not an enforcement action.”
The decision to audit comes, in part, because of a prior risk assessment done by AUSTRAC. AUSTRAC CEO Brendan Thomas said about the risk assessment done last year “highlights the increasing vulnerability of digital currencies to criminal abuse.” This move for an external audit request ultimately follows prior regulatory engagement across what has been labelled the “priority sector” that the cryptocurrency market has become.
AUSTRAC has also shared some concerns over the high staff turnover rate that has been seen at Binance. Not only that, but it also has concerns over the lack of senior management oversight and local resourcing. Those factors have ultimately raised questions on behalf of AUSTRAC about the adequacy of Binance’s CTF and AML governance.
“This is a global company operating across borders in a high-risk environment. We expect robust customer identification, due diligence, and effective transaction monitoring,” noted Thomas.
Australian Trouble for Binance
The move on the part of AUSTRAC to audit Binance should not come as a complete surprise. After all, it isn’t the first time that Binance has found itself staring down the barrel of regulatory compliance in Australia before.
Late last year, the Australian Securities and Investments Commission (ASIC) moved to take legal action against Binance Australia Derivatives. ASIC alleged that Binance had demonstrated a failure to offer adequate consumer protections.
During the summer of 2023, ASIC had searched the offices of Binance’s Australia branch. The on-site investigation was part of a larger probe into the defunct Australian derivatives business of the exchange. That action followed a move on the part of ASIC to cancel Binance Australia’s derivatives licence.
Local regulators decided to take a closer look at Binance Derivatives as a result of questionable account closures. Clients were listed as “wholesale clients” and had their accounts closed because of a false classification.
Debanked in Australia
Also in 2023, Binance was forced to halt its Australian dollar fiat money services. This came because Zepto, its local payment services provider, was told to stop supporting the Australian branch of the exchange.
In statements released later, it seems as though Binance got less than a day’s warning from a number of payment partners before ultimately being “cut off” from Australia’s banking system. It has had major implications ever since.
Even to this day, the exchange advises its users who plan to withdraw Australian dollars from its platform to either use peer-to-peer trading services or to buy the USDT stablecoin in order to transfer funds off the platform. Attempting to use the “bank transfer” option isn’t available; it is greyed out and the message “channel suspended” is in its place.
Increased Scrutiny from AUSTRAC
This move is the latest on the part of AUSTRAC and it highlights an increased scrutiny of the cryptocurrency marketplace as a whole. Regulators around the world are trying to handle the various challenges that come with ensuring financial integrity in a rapidly expanding and evolving digital assets space.
AUSTRAC is an intelligence agency given the task of monitoring and enforcing compliance as it relates to AML and CTF laws. This effort is to prevent potential illicit activities like fraud, terrorism financing, and money laundering.
AUSTRAC has yet to publicly detail any specific issues as it relates to Binance’s Australian operations. That said, it does underscore AUSTRAC’s commitment to holding crypto exchanges responsible for its compliance measures.
If anything, this audit requirement shows that regulators are not quite satisfied with the current CTF and AML frameworks outlined by Binance. AUSTRAC has noted potential gaps in how Binance monitors and reports any suspicious activity.
AUSTRAC will have to take on the task of thoroughly reviewing the exchange’s current compliance processes. Moreover, it will need to assess whether they meet the current regulatory standards in Australia while also making recommendations on potential improvements.
Australia Proactive in Digital Asset Regulation
This move by AUSTRAC underscores a more proactive approach when it comes to regulating digital assets. Part of the process involves having crypto businesses register with AUSTRAC while also complying with AML/CTF requirements.
As part of the requirements, entities like Binance must monitor transactions for any potential suspicious activity, implement necessary customer identification procedures, and report any transactions above a certain threshold or those that are deemed to be illicit. A failure to follow these protocols can result in major penalties, including restrictions on operations.
Binance can treat this instance as not only a challenge but an opportunity as well. Though it puts Binance under more intense scrutiny, it could lead to the uncovering of potential deficiencies that could cause further problems but also lead to additional regulatory action.
An Increase in Money Laundering
One of the major concerns that created this action from AUSTRAC is an increase in money laundering activities surrounding cryptocurrencies. Reports studying the various trends and methods through which money can be laundered showed that crypto is being used for fraud and other crimes since crypto is “cross-border, virtually instant, and generally inexpensive to transact.”
In a report from Chainalysis, the firm said, “The growing ubiquity of crypto has made it a tool for laundering proceeds from various off-chain crimes, such as narcotics trafficking and fraud. In 2024, money laundering in crypto encompasses all crime – not just that which is inherently tied to the crypto ecosystem.”
A Positive Move for Australian Crypto?
Though Binance is no doubt displeased with these developments, this could be a positive move for the regulatory environment in Australia as a whole. The primary thing keeping investors from joining is uncertainty over regulations within the industry.
As AUSTRAC and ASIC continue to crack down on potentially disreputable actions, investors no doubt must be feeling more confident. Improved security measures help keep investors safe, something that has traditionally not been part of the cryptocurrency sector.
What comes of this audit will be under the watchful eye of the cryptocurrency community, especially in Australia. While it is not anticipated that this audit will result in Binance’s removal from the Australian market, things will need to change. This could also perhaps be the domino that falls, resulting in greater participation in the Australian cryptocurrency marketplace in the near future on the part of investors.
