Largest crypto exchange Binance knowingly skirted US sanctions by serving clients in Iran, according to a Reuters report.
CEO Changpeng Zhao (CZ) responded to the news via Twitter, saying the exchange used the Thomson Reuters World-Check data to screen customers — effectively passing blame to suggest Reuters’ know-your-customer (KYC) tool was inadequate in blocking Iranian users.
In an exclusive report published Monday, Reuters revealed at least 18 people in Iran said they traded crypto via Binance after the US reintroduced sanctions on Iran back in 2018, restricting crypto exchanges from serving customers in the country. What’s more, top ranking employees were reportedly aware of the sanction-skirting — even bragging about Binance’s popularity in Iran over Telegram messages.
Interviews with seven users revealed that it was only in September 2021 when Binance restricted their access, once anti-money laundering checks were improved. Until then, Binance was the exchange of choice due to its extremely lax requirements.
“There were some alternatives, but none of them were as good as Binance,” Tehran-based trader Asal Alizade told Reuters. “It didn’t need identity verification, so we all used it.”
Indeed, according to the news outlet, only an email address was needed for Iran users. “They succeeded in gaining a huge trading volume, with many pairs of currencies, within a short period of time,” said crypto hedge fund manager Pooria Fotoohi, who also claimed to use Binance from 2017 to 2021.
- Back in 2018, Binance marked Iran, Cuba, Syria, North Korea, and Crimea as sanctioned countries it would not work with or provide services to, according to internal documents seen by Reuters.
- CZ encouraged followers on Twitter to use VPNs in a now-deleted post from 2020, as well as generally acknowledging that year in an interview that users skirt Binance controls.
- At least three senior employees at Binance were aware and making jokes about the exchange’s continuing popularity in Iran, Reuters revealed.
Binance was proud to be skirting sanctions
After Russia invaded Ukraine back in February, Binance was unwilling to ban Russian users at the request of western powers. CZ claimed it would be ‘unethical’ to impose a blanket ban, beyond specific individuals under sanctions — only to step in line when the EU made it mandatory in April.
Binance has repeatedly claimed it consistently adheres to international sanctions and that it has a “global compliance task force” to keep things above board.
Yet serving Iranian customers has been a no-go for four years. That didn’t stop Binance’s inner circle from boasting about its success in the sanctioned country. According to Reuters, ‘senior employees’ were aware of the exchange’s success. “IRAN BOYS,” read one of several messages the outlet obtained — the text was from a higher up directly responding to data that revealed just how popular Binance was on Instagram in Iran.
Yet in response to Reuters’ exclusive investigation, CZ took to Twitter immediately to say that it used Thomson Reuters’ own screening tool World-Check to block Iran-based users.
“Thomson Reuters offers opt-in, extension content, targeting specific geographies and industries that fall within the broader remit of KYC risk intelligence,” it says in its official brochure.
“Various countries imposed restrictions against Iran that bar specific exports and investments. The Iran Economic Interest (IEI) data set allows customers to screen all of their customers, partners, counterparts and business transactions for potential Iran sanction risk,” (our emphasis).
The news outlet reports that due to Iran-based users relying on Binance’s main exchange — and not Binance.US — it’s protected from US regulators when it comes to skirting US sanctions.
“But Binance does run a risk of so-called secondary sanctions,” Reuters said. “As well as causing reputational damage, secondary sanctions can also choke off a company’s access to the US financial system,” (our emphasis).
Protos has reached out to Reuters and Binance to learn more about how the World-Check can be and was used to adhere to international sanctions against Iran. We’ll update this piece should we hear back.