DOJ partners with Forensic Risk Alliance to ensure Binance's AML and sanctions compliance

The US Department of Justice (DOJ) has appointed Forensic Risk Alliance (FRA) to oversee Binance's adherence to money laundering and trade sanctions regulations, according to Bloomberg. This selection comes as part of Binance's settlement regarding accusations of breaching financial regulations. FRA was chosen over other notable contenders like Sullivan & Cromwell, a distinguished Wall Street law firm.

As per the settlement terms, Binance must undergo three years of thorough monitoring. This process entails providing FRA with access to internal records, facilities, and staff to ensure compliance with regulatory standards. Given FRA's extensive experience in investigating corruption and fraud, it is deemed well-equipped to effectively fulfill its monitoring duties.

This development underscores the heightened scrutiny confronting major players in the cryptocurrency realm and underscores the vital role of independent monitors in upholding compliance. Initially seen as a top candidate for the role, Sullivan & Cromwell encountered obstacles due to its affiliation with FTX, a former competitor of Binance.

Sullivan & Cromwell's ties to FTX, especially prior to its financial distress and subsequent recovery endeavors, raised concerns about its impartiality in oversight. Allegations of overlooking fraudulent activities during the FTX collapse further tarnished Sullivan & Cromwell's reputation, prompting the DOJ to opt for an alternative monitor.

Following FTX's collapse, critics who suffered financial losses raised concerns that Sullivan & Cromwell, in its pre-bankruptcy capacity, may have overlooked fraudulent activities perpetrated by co-founder Sam Bankman-Fried. However, FTX's new management staunchly defended the firm, refuting allegations and lauding its invaluable contributions to the recovery process.

In a recent development, FTX announced its commitment to fully compensate customers, along with interest, for any losses incurred during the bankruptcy proceedings.

Meanwhile, Sullivan & Cromwell is poised to secure a distinct five-year monitorship with Binance, appointed by the Treasury Department's Financial Crimes Enforcement Network. This comes as Binance faces intensified scrutiny, with the Treasury Department urging the identification and reporting of tens of thousands of suspicious activity transactions previously alleged to have been overlooked by the company.

Cryptocurrency regulatory storm: Binance battles

Binance's commitment to monitoring and the imposition of significant penalties underscore the intensifying regulatory scrutiny surrounding cryptocurrency exchanges. The involvement of the Forensic Risk Alliance (FRA) signifies a dedication to stringent oversight and illuminates the shifting regulatory terrain within the cryptocurrency industry.

The legal saga that unfolded, beginning in June 2023, saw the Securities and Exchange Commission (SEC) filing a lawsuit against Binance and its former CEO, Changpeng Zhao, alleging breaches of securities laws. Concurrently, Binance grappled with a monumental $4.3 billion settlement with the Justice Department, marking a significant chapter in its legal battles. Binance contested the SEC's actions, citing procedural irregularities and questioning the correlation between the Justice Department's resolutions and the SEC's original claims.

Furthermore, amidst mounting concerns over extradition and flight risk, a US federal judge imposed a travel ban on Zhao, prohibiting him from journeying to the United Arab Emirates. Despite agreeing to post a substantial $175 million bail, apprehensions persist regarding Zhao's substantial wealth and connections to the UAE, casting doubt on his commitment to return for sentencing. Recently, Zhao received a four-month prison sentence, further punctuating the complexities of the legal entanglements surrounding Binance and its leadership.

Broader Implications for the Cryptocurrency Market

FRA's appointment as a compliance monitor signifies a heightened regulatory focus on the cryptocurrency sector. The DOJ's move aims to ensure Binance's compliance with U.S. financial laws, setting a precedent for legal adherence throughout the industry. It reflects a broader governmental commitment to upholding legality and security in the rapidly evolving digital financial landscape.