According to local media reports, French authorities have been investigating Binance for multiple infringements. Notably, the investigations have been into the exchange since February 2022 and among the allegations there are serious concerns of money-laundering.
On Friday, the Paris public prosecutor’s office told local media that the investigation against the largest crypto exchange is “two-pronged” which mean divided into two parts. Explaining the process, sources reported that first, authorities are looking into whether Binance solicited French users and thereby operated without a license in the country. Second, the authorities are investigating into “acts of aggravated money laundering, through participation in investment operations, concealment, conversion, the latter being carried out by perpetrators of offenses having generated profits.”
Reportedly, aggravated money laundering refers to cases of systematic laundering or those that involve large amounts of laundered funds involving multiple launderers. According to local media reports authorities believe Binance failed to meet its know-your-customer (KYC) and anti-money laundering (AML) obligations. Importantly, sources reveal that Binance did not implement compulsory KYC verification until August 2021.
Since 2019, the French rules mandate crypto exchanges to obtain a digital asset service provider (DASP) license and register with the Financial Markets Authority (FMA) to operate in France. Without the license and registration, crypto firms are not allowed to advertise their services to French consumers. Notably, Binance became a fully regulated crypto exchange in France in May last year. However, media reports stated that the exchange has been offering services in the country since 2020.
Sources reveal that the authorities likely suspect that Binance illegally advertised and promoted its services in the country to attract potential French users before it obtained its license. Speaking to media, a Binance spokesperson said that the exchange is working closely with regulators to meet all compliance requirements. The spokesperson added:
Binance invests considerable time and resources into cooperating with law enforcement globally. We abide by all laws in France, just as we do in every other market we operate.
While the exchange declined to comment on ongoing investigations, the spokesperson confirmed that Binance had an on-site visit by French authorities last week and such visits by regulators and inspectors are part of the regulatory obligations of financial firms in the country.
On the other hand, the prosecutor’s office stated that the documents and computers collected during these searches of Binance premises will be the “subject of an in-depth study.” Notably, the news of the probe comes on the same day that Binance announced its withdrawal from the Netherlands after failing to secure a license.
Additionally, the concerns highlighted by the French authorities align with those of the United States Securities and Exchange Commission (SEC), in their recent lawsuit against Binance’s US. In its lawsuit, the SEC alleged that Binance illegally solicited U.S. customers, commingled user and corporate funds, and failed to comply with anti-money laundering rules.
Simultaneously, in May, the US Department of Justice (DoJ), launched an investigation into Binance for money laundering concerns and some expect the agency to take action the exchange. This adds up to the regulatory crackdown Binance branches are facing at different locations putting its image into question.