AUSTRAC has directed Binance Australia to appoint an external auditor after identifying serious concerns with the crypto exchange’s anti-money laundering and counter terrorism financing (AML/CTF) controls.
Investbybit Pty Ltd, Binance Global’s Australian arm, is an AUSTRAC registered digital currency exchange provider.
By transaction volume it is the world’s largest centralised crypto exchange. Established in 2017, it holds regulatory approvals or permissions in around 20 jurisdictions.
AUSTRAC CEO, Mr Brendan Thomas, said AUSTRAC’s National Risk Assessment 2024 highlights the increasing vulnerability of digital currencies to criminal abuse and the action against Binance follows regulatory engagement across the priority sector.
“AUSTRAC is committed to working with industry to ensure strong safeguards are in place to make it harder for criminals to move and conceal illicit funds using digital currencies,” Mr Thomas said.
“Big global operators may appear well resourced and positioned to meet complex regulatory requirements, but if they don’t understand local money laundering and terrorism financing risks, they are failing to meet their AML/CTF obligations in Australia.
“Businesses can have systems and processes that apply to multiple jurisdictions – but they need to reflect local regulatory requirements. The systems must adapt to the regulatory requirements, not the other way around.
“Understanding specific risks of criminality in the Australian context is crucial to ensure they’re meeting their reporting obligations here.”
AUSTRAC’s concerns were prompted by several issues including Binance’s latest independent review which was limited in scope relative to its size, business offerings and risks.
“Businesses need to maximise the value of independent reviews and ensure appropriate testing and review across critical processes and controls. They should seek and expect a level of rigour and challenge.”
AUSTRAC has also flagged concerns with high staff turnover at Binance and a lack of local resourcing and senior management oversight, raising questions about the adequacy of its AML/CTF governance.
Mr Thomas said AUSTRAC expects tighter controls from major global operators, particularly in high risk sectors involved in large transaction volumes.
“This is a global company operating across borders in a high-risk environment. We expect robust customer identification, due diligence and effective transaction monitoring,” said Mr Thomas.
“I remind all digital currency exchanges to remain alert to transactions that indicate suspicious behaviour, including money laundering via scams and cybercrime and terrorism financing – the potential for these activities are much higher for global exchanges.
“Capacity and risk controls need to correspond to the size of a business and its market presence, particularly as it scales.
“All digital currency operators need to ensure they are complying with Australian law and limiting their exposure to crime.”
Binance Australia has 28 days to nominate external auditors for AUSTRAC’s consideration and selection.