The CNBC report says that Binance employees and other trained volunteers dubbed “Angels” are helping mainland Chinese residents to circumvent Binance KYC rules.
Industry experts have raised questions about Binance’s security protocols and said that the laxity extends beyond China.
China banned the use and trade of cryptocurrencies long back in 2017. However, this hasn’t prevented local Chinese citizens from participating in the crypto market. As per the latest CNBC report, Binance employees and trained volunteers have been helping crypto enthusiasts in China Binance’s Know Your Customer (KYC) controls to hide their country of origin and residence.
As proof for the same, CNBC cites messages in Binance’s official Chinese-language chatrooms show. The publication stated that they have translated and reviewed hundreds of messages from the Discord server as well as the Telegram Group.
Over 220,000 users have registered across both groups. CNBC notes that the messages that they reviewed came from accounts identified as Binance employees and other trained volunteers dubbed “Angels”. These messages basically consisted of techniques to evade Binance’s KYC, residency and verification systems.
Other techniques that the “Angels” have shared involve forging bank documents, offering false addresses, and other simple manipulation of Binance’s systems. Interestingly, this group of “Angels” also shared video guides and documents showing the residents of mainland China how to falsify their resident proofs in order to get access to Binance’s crypto debit cards. This would then effectively convert their Binance cryptocurrencies into conventional checking accounts.
If true, it is interesting to see how Chinese residents are willing to take massive risks to gain access to digital assets.
Binance’s AML Efforts Under Question
Binance founder Changpeng Zhao has often touted that they have made a billion-dollar effort in making their know-your-customer systems, known as KYC, robust and effective. These KYC efforts are supposed to stop customers who aren’t on the platform, including residents from China.
However, the current development shows that Binance isn’t doing enough to stop such practices and the opening of accounts through falsified details. Speaking to CNBC, Duke University professor and former FDIC Chief Innovation Officer Sultan Meghji said:
If I had a eight out of 10 concern about Binance from a regulatory perspective and from a national security perspective, this takes it to a 10 out of 10″. Adding further that the laxity of Binance’s enforcement extends beyond China, Meghi added: “I think explicitly about the national security implications of how terrorists, criminals, money launderers, cyber people in North Korea, Russian oligarchs, etc., could use this to get access to this infrastructure.
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When CNBC reached for comments a Binance spokesperson said: “We have taken action against employees who may have violated our internal policies including wrongly soliciting or making recommendations that are not allowed or in line with our standards. We have strict policies requiring all users to pass KYC by providing us with their country of residence and other personal identification information.”
The spokesperson further added that Binance employees have been explicitly forbidden from supporting users in circumventing their local laws.
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