Increased Scrutiny of Cryptocurrency Sector
Australian regulators are intensifying scrutiny of the cryptocurrency sector, particularly targeting Binance Australia, the local arm of the world’s largest cryptocurrency exchange. Recently, AUSTRAC (Australian Transaction Reports and Analysis Centre) mandated that Binance appoint an external auditor to address acute deficiencies identified in its anti-money laundering (AML) and counter-terrorism financing operations.
Mandatory Audit and Compliance Failures
This directive requires Investbybit Pty Ltd, Binance’s Australian subsidiary, to nominate auditors within 28 days for AUSTRAC’s approval due to ongoing regulatory dialogues surrounding compliance in the financial services sector.
The impetus for this mandatory audit stems from a series of compliance failures that AUSTRAC uncovered. These include:
- Inadequate independent review mechanisms relative to its substantial scale
- Frequent changes in personnel
- A notable lack of local oversight by senior management
Brendan Thomas, AUSTRAC’s CEO, highlighted the necessity for global operators to fully comprehend the local risks associated with money laundering and terrorism financing, advising that systems designed for one jurisdiction must be tailored to meet the specific regulatory standards of each locale.
Broader Regulatory Initiatives
This latest action against Binance is part of a broader initiative by AUSTRAC to enforce stricter compliance within the cryptocurrency space. The agency is actively investigating around 50 additional digital currency exchange and remittance providers following compliance lapses. Furthermore, it has recently suspended or revoked licenses for nine firms that failed to meet obligations outlined under the Anti-Money Laundering and Counter-Terrorism Financing Act.
Task Force and Consumer Protection
Enhancing their regulatory grip, AUSTRAC has assembled a task force dedicated to tackling violations among cryptocurrency ATM operators. As part of this extensive crackdown, the agency identified alarming trends indicating that suspicious activities and fraudulent transactions may be increasingly linked to these platforms.
In an effort to clean up the sector, AUSTRAC has warned 427 registered digital currency exchanges about the potential for deregistration if they remain inactive. Consumers will soon have a new tool to safeguard themselves from fraudulent schemes, as AUSTRAC plans to unveil a publicly accessible register that allows individuals to verify the official registration status and regulatory oversight of cryptocurrency exchanges.
ASIC’s Enforcement Operations
Alongside AUSTRAC’s efforts, the Australian Securities and Investments Commission (ASIC) has stepped up its enforcement operations, shutting down approximately 130 scam websites every week and dismantling over 10,000 malicious platforms, including significant numbers of phishing and deceptive investment sites. Recently, the Federal Court permitted ASIC to dissolve 95 companies implicated in international scams tied to fraudulent investment schemes, following substantial losses reported by victims.
Confronting Money Laundering Schemes
The Australian government is also confronting sophisticated money laundering schemes that are utilizing cryptocurrency to convert illegal gains into digital assets. For example, a recent operation led to charges against four individuals accused of processing an enormous sum of $190 million through a legitimate business, effectively channeling criminal proceeds into cryptocurrency via convoluted logistics across the country. Law enforcement agencies continue their efforts to clamp down on such networks, with substantial assets being seized in the process.
International Investigations
Further complicating the landscape, Binance is also currently under investigation in France on allegations of engaging in activities facilitating habitual money laundering connected with drug-related crimes and tax evasion throughout the European Union. Binance has refuted these claims, stressing its commitment to compliance while addressing compliance issues with regulators globally, including discussions regarding its potential regulatory treatment under new EU cryptocurrency laws.
