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London, July 11 (Reuters)-Binance, the world’s largest cryptocurrency exchange, continued to process transactions by Iranian clients despite US sanctions and corporate bans on transactions in Iran. Discovered by a Reuters investigation.
In 2018, the United States re-imposed sanctions that had been suspended three years ago as part of a nuclear deal with Iran’s major world powers. In November, Binance informed Iranian traders that they would no longer serve and instructed them to liquidate their accounts.
However, in an interview with Reuters, seven traders said they evaded the ban. Traders said they continued to use their Binance accounts until September last year and lost access only a month ago after the exchange strengthened its money laundering prevention checks. Until then, you could only register and trade with your email address.
Tehran trader Asal Alizard said he had been on the exchange for two years until September 2021 and said, “There were several options, but none were as good as Binance.” used”
Eleven other Iranians other than those interviewed by Reuters said in their LinkedIn profile that they traded cryptocurrencies on Binance after the 2018 ban. None of them answered the question.
The popularity of the exchange in Iran was known internally. According to the 10 messages sent to each other in 2019 and 2020, which were first reported here, senior employees were joking, knowing that the ranks of Iranian users on the exchange were rising. “IRAN BOYS” was written in response to data showing the popularity of Binance on Instagram in Iran.
Binance did not answer Reuters’ question about Iran. In a March blog post published in response to Western sanctions against Russia, Binance “strictly follows international sanctions rules” and “global compliance, including world-renowned sanctions and law enforcement experts. He said he formed the “Task Force”. Binance said it used “bank-grade tools” to prevent sanctioned people and organizations from using the platform.
Iran’s mission to the United Nations in New York did not respond to requests for comment.
Iran’s trading on the exchange could be of interest to US regulators, seven lawyers and sanctions experts told Reuters.
Binance, whose holding company is based in the Cayman Islands, says it has no headquarters. We do not provide details about the entities behind the major Binance.com exchanges that do not accept customers in the United States. Instead, US clients are directed to another exchange called Binance.US. The exchange is ultimately managed by Binance founder and CEO Changpeng Zhao, according to a regulatory filing in 2020.
According to lawyers, this structure means that Binance is protected from direct US sanctions that ban US companies from doing business in Iran. This is because Iranian traders used Binance’s major exchanges, which are not US companies. However, Binance poses the risk of so-called secondary sanctions aimed at preventing foreign companies from trading with sanctioned entities and helping Iranians circumvent US sanctions. I owe it. Secondary sanctions not only cause reputational damage, but can also prevent businesses from accessing the US financial system.
Binance’s exposure depends on whether the sanctioned person is trading on the platform and whether Iranian customers have circumvented the US sanctions as a result of the transaction. Erich Ferrari, Ferrari &’s chief attorney, said, “Exchanges outside the United States may face the consequences of promoting sanctioned conduct. Washington Associates Law Office.
Reuters found no evidence that sanctioned individuals used Binance.
When asked about Iranian traders using Binance, a US Treasury spokesman declined to comment.
Binance continued to weaken user compliance checks until last year, despite concerns raised by some senior company figures, Reuters reported in January in an interview with a former senior employee. We used internal messages and communications with national regulators. The exchange said it was pushing industry standards in response. Reuters’ new report shows for the first time how the gap in Binance’s compliance program has enabled Iranian traders to do business on the exchange.
Binance dominates the $ 950 billion crypto industry, providing 120 million users with digital coins, derivatives and non-alternative tokens, and processing hundreds of billions of dollars worth of transactions each month. Exchanges are becoming more and more mainstream. Its billionaire founder Zhao (known as CZ) has turned into a traditional business by promising $ 500 million to buy Twitter by Tesla boss Elon Musk this year. Expanded his range. Musk has since said he has withdrawn from his contract. Last month, Binance hired Portuguese soccer star Cristiano Ronaldo to promote its NFT business.
Since the Islamic Revolution in 1979, Western countries and the United Nations have imposed sanctions in response to Iran’s nuclear program, along with allegations of human rights abuses and terrorist support. Iran has long argued that the nuclear program is for peaceful purposes.
Under the 2015 agreement between Iran and the six world powers, Tehran curtailed its nuclear program in exchange for some sanctions relaxation. In May 2018, President Donald Trump broke the agreement and ordered the re-imposition of relaxed US sanctions under the agreement. The curb came into effect in August and November of that year.
After Trump’s move, Binance added Iran to the list of what its terms of use call “sanctioned countries” and said it could “restrict or deny” services in such areas. .. In November 2018, Iran’s customers were warned by email to withdraw their cryptocurrencies from their accounts “as soon as possible”.
Publicly, some Binance executives have praised the compliance program. In a December 2018 blog, the then Chief Financial Officer said he had taken a proactive approach to detecting and crushing money laundering, saying he had made a large investment to combat dirty gold. I did. In March of the following year, we adopted a US compliance platform to assist in screening for sanctions risk.
By August 2019, Binance, along with Cuba, Syria, North Korea and Crimea, considered Iran a “hard five sanctions” jurisdiction, according to internal documents confirmed by Reuters. The May 2020 document included Iran on the list of countries entitled “Strictly No”, citing Chief Compliance Officer Samuel Lim.
According to traders, even if Binance’s stance towards Iran was solidified, its popularity among the corps of cryptocurrency users in the country was growing, the traders quoted from knowledge of the local industry.
Cryptocurrencies have become attractive there as sanctions have hit the economy so hard. Since the birth of Bitcoin in 2008, users have been attracted to the cryptographic promise of financial freedom beyond the reach of the government. Separated from global financial services, many Iranians relied on Bitcoin to do business on the Internet, according to users.
“Cryptocurrencies are a good way to avoid sanctions and make good money,” said Ali, a trader who spoke on the condition that he was identified only by his name. Ali said he had used Binance for about a year. He shared a message between Reuters and Binance’s customer service representative, indicating that the exchange closed its account last year. Citing recommendations from the UN Security Council sanctions list, they said Binance was unable to serve Iranian users.
Other traders on the exchange cited weak background checks on clients, an easy-to-use trading platform, deep liquidity, and a number of cryptocurrencies that could be traded as reasons for growth in Iran.
Pooria Fotoohi, who lives in Tehran and runs a crypto hedge fund, said he used Binance from 2017 to September last year. Binance has beaten the Iranians because of its “simple” customer-knowing control, he said, focusing on how traders can open an account simply by providing their email address.
“They managed to win huge trading volumes with many currency pairs in a short period of time,” said Fotoohi.
Binance’s Angels volunteers sharing information about interactions around the world also helped spread the word.
In December 2017, Angels announced the launch of a group called “Binance Persian” in its Telegram messaging app. The group is no longer active. Reuters could not determine how long it had been in operation, but after Washington imposed sanctions, it identified at least one Iranian who was an active angel.
According to his LinkedIn profile, Mohsen Parhizkar was an angel from November 2017 to September 2020, managing and assisting Persian groups. The person who worked with Parhizkar confirmed his role and shared the messages they exchanged. Parhizkar, contacted by Reuters, said Binance had canceled the program in Iran due to sanctions. He didn’t elaborate.
After the 2018 ban, at least three Binance senior employees were aware that exchanges were popular in Iran and used by clients there. You’ll see 10 telegrams between employees and company chat messages that Reuters saw.
By September 2019, Tehran has become one of the top cities for followers on Binance’s Instagram page, surpassing Newyork and Istanbul. One message of the same month shows. After that, employees downplayed this. One jokingly suggested promoting Binance’s popularity in Iran, saying, “Push it on BinanceUS Twitter.”
In a separate exchange from April 2020, senior employees also mentioned that Iranian traders are using Binance, not to mention how he knew this. The same year’s Binance Compliance document, reviewed by Reuters, gave Iran the highest risk assessment of any country for illegal financing.
Further driving growth in Binance in Iran, according to traders, is through virtual private networks (VPNs) and tools that hide Internet Protocol (IP) addresses that allow users to link their use of the Internet to locations. Was easy to avoid. North Korean hackers used a VPN to hide their location while setting up an account on Binance to launder the stolen crypto in 2020, Reuters reported in June.
Business development worker Mehdi Qaderi said he used a VPN to trade about $ 4,000 worth of cryptocurrencies on Binance during the year to August 2021.
In a 2021 guide on how sanctions apply to crypto companies, the US Treasury said there are advanced analytical tools that can detect obfuscation of IP addresses. Cryptocurrency companies can also collect information to alert users in sanctioned countries, such as from email addresses.
Sidur Rahman, General Counsel of the Rahman Laveli Law Office in London, said:
Binance itself supported the use of VPNs.
Binance CEO Zhao tweeted in June 2019 that VPNs are “required, not optional.” He deleted the comment by the end of 2020. Asked about the tweet, Binance didn’t comment. In July of the following year, Binance published a “VPN Beginner’s Guide” on his website. One of the tips: “We recommend using a VPN to access sites that are blocked in your country.”
Zhao was aware that crypto users generally circumvent Binance control. He told interviewers in November 2020, “Users sometimes find intelligent ways to avoid our block, and we have to be smarter about how to block.”
((Report by Tom Wilson and Angus Berwick, edited by Janet McBride))
Our criteria: Thomson Reuters trusts the principles.
