In 2021, Binance did business worth $9.5 trillion in crypto. China stopped letting people trade cryptocurrencies in 2021.
Changpeng “CZ” Zhao, the founder of Binance, said that KYC was a billion-dollar project. Clients from China can’t even use the platform.
The fact that Binance has official chatrooms in Chinese shows that Chinese and other clients break the rules to hide their nationality.
CNBC translated and looked at a large number of Binance’s Discord and Telegram messages. Any person could join one of the 220,000 clubs. CNBC looked at mail from 2021 to 2023 until late March.
CNBC looked at employee and “Angel” messages from Binance. These emails told people how to get around Binance’s KYC, residency, and verification requirements.
Workers and volunteers have passed out fake addresses and forged bank documents. Simple manipulation of the Binance system.
Employees, volunteers, and customers made videos showing mainland residents how to lie about their country of residence to get Binance’s debit card, which turned their Binance coin into a checking account.
Customers in China who use Binance are taking a big risk since China has banned cryptocurrency and cryptocurrency exchanges. Chinese seek illegal goods.
Consumers don’t like how Binance stops people from laundering money. International businesses like Binance need KYC and AML to make sure that their clients don’t do things like commit terrorism or fraud.
Financial regulators thought it was easy to get around Binance’s KYC and AML rules.
Sultan Meghji, a professor at Duke University and former FDIC Chief Innovation Officer, told CNBC, “If I had an 8 out of 10 worries about Binance from a regulatory and national security point of view, this makes it a 10 out of 10.”
Meghji is worried about Binance’s weak enforcement of KYC outside of China. “I worry right away about the national security implications of how terrorists, criminals, money launderers, cyber guys in North Korea, Russian billionaires, etc. could use this to get access to this infrastructure,” he said of the published methods.
Jim Richards, who works for Wells Fargo to stop money laundering, saw that Binance’s way of getting around KYC could have effects all over the world. Customers from North Korea, Russia, and Iran? Richards questioned.
Binance told CNBC, “We have taken action against staff who may have broken our internal rules, like asking for advice in a way that isn’t allowed or doesn’t fit with our values.” Strong KYC rules require all users to give their country of residence and other information about who they are.
The representative said that Binance staff cannot encourage users to break local laws or help them do so.
CNBC talked to employees and Angels of Binance. Someone told CNBC to get in touch with Binance PR. No one answered.
Compliance, evasion
Since China made cryptocurrency illegal in 2021, Bloomberg said that Binance stopped taking Chinese cell phone numbers. Bloomberg said that the company blocked IP addresses from China.
Chinese clients have used employee and volunteer advice to trade on Binance. These steps may help you get around the Chinese internet firewall by using VPNs.
A May 2022 user of Binance’s Discord help channel asked, “How can mainland users sign up now?”
Yaya, a worker at Binance, told them they should turn on their VPN, sign up as Taiwanese residents, and change back to Chinese citizenship. The worker said that VPN nodes in the US, Singapore, and Hong Kong should be avoided. Binance makes it hard for people in these countries to buy products.
Neel Maitra, a partner at Wilson Sonsini and a former special counsel for cryptocurrencies at the SEC, told exchanges to limit VPN use.
Maitra told CNBC that evasion is a big part of most of the best exchange practises. Even though an exchange can’t stop or police every type of tax evasion, I think most regulators would expect them to police the most common ones.”
Binance told CNBC that it used “advanced detection methods” to find people in “restricted and sanctioned locations” who had access to “sophisticated masking tools” like VPNs.
Avoid VPNs.
Stella, a community manager for Binance, posted on a server-wide announcement channel in December 2022 about how to use Binance services by using a “VPN-free” domain name and downloading software that was made for mainland China.
Binance.com sent CNBC the link to the app by email. Without a VPN, a reporter in China was able to get the programme. The Chinese cloud computing giant Tencent hosts the service, which lets Binance customers buy cryptocurrency with Chinese currency using WeChat or Alipay. KYC checks are done with Chinese IDs.
CNBC said that they didn’t have any software for Chinese users. A representative said, “Binance does not have a Chinese Android app.” “The official app for Binance.”
CNBC emails show that employees send questions about Know Your Customer (KYC) to Binance Angels, which is against the rules. Binance says that Angels “do not work for Binance.”
In a blog post, an Angel said, “Our role is small, and we don’t speak for Binance.”
A job portal says that Angels who speak Chinese train for a year. Binance gets help from the Telegram and Discord communities to test, train, and use them.
Reuters said that Binance Angels get discounts on their services in exchange for bitcoin.
CNBC saw an Angel give advice to a user who couldn’t get to the Binance pages for mainland China in October 2022.
Angel said to try again after changing the VPN location.
A March 2022 user asked how users from mainland China sign up for accounts.
After registering with an email address from outside of the United States, the same Angel told the user to choose Taiwan as their place of residence.
That volunteer gave advice to other people. In April 2022, another person who said they lived in mainland China asked, “What could I do if proof of residency is needed?” Can I go? This Angel said there is no need to show proof of registered residence.
Communications from March 2022 show that a person who says to live on the mainland is worried about downloading Chinese identity documents. The same Angel told the customer that would accept a Chinese ID and citizenship from Taiwan.
The Angel told the user, “[Binance] doesn’t do business on the mainland, but it can’t stop mainland users from getting around the Great Firewall to play.”
Angels teach users about the exchange, the blockchain, and the best ways to use the system.
In April 2022, two Binance Angels showed Chinese users how to use Launchpad.
Chinese people can’t take part in ICOs.
“How do people from the mainland get involved in Launchpad?” the workshop leader asked with suspicion.
Users said impossible.
During the Q&A, another Angel said that customers from the mainland can get around Binance’s rules by starting a foreign corporation or KYC.
Angel praised the person who answered “overseas company” the fastest.
Binance told CNBC that the Angels do not work for them.
Binance Angel Program builds community, just like Wikipedia and Reddit. Binance Angels are not allowed to speak for or use Binance systems. If Angels are caught, they will be kicked out.
Palau started its digital residency programme in 2022. For several hundred dollars, people could get an ID card that was linked to the NFT.
In 2022, Zhao said it was “very clever.”
Binance can be accessed by people outside of Palau who have a “residence” there.
CNBC found messages on Telegram and Discord that talked about Palau’s plan to get around Binance’s country-specific restrictions.
A customer who worked with Angels said that Angels told customers to look at a tweet from an October 2022 Binance client relationship manager when they asked how to get things or currencies that Chinese people couldn’t get. The deleted tweet had a link to a third-party Mandarin YouTube tutorial on how to use Palau residency to get around Binance’s EU KYC limits even if the user lived outside the EU.
Clients who “pass” are eligible for Binance’s restricted Visa debit card, which turns bitcoin into fiat currency that can be used anywhere in the world. Visa declined.
The third-party video explains how to sign up for Palau, buy an ID, and upload to the Binance exchange. Next is a fake mail-forwarding address in Austria. Here is the German bank statement of the person who made the video, along with instructions for adding the Austrian address. The person who made the video says that a PDF editor can be used to make a fake bank statement.
In November 2022, mainland Chinese ask about the Binance Card in Discord chats. An angel suggested seeing the movie to get it.
Binance’s denial was reported by CNBC. “Neither Binance nor Angel owns or made that video.”
In November and December 2022, fake Austrian IDs were discussed at other meetings that didn’t talk about this video.
“Some users said their accounts were banned after they tried to change their addresses to countries that were not allowed,” a Binance representative said to a person who wanted to get a debit card.
The customer was able to convince the Binance staff that they used bank statements from Austria.
In December 2022, members of Binance’s Chinese-language Telegram group said they had not received debit cards.
One person said, “Chinese can’t.”
Another user led them to a movie that had the same fake address and German bank account.
“What if you can’t find the right papers?” the second person who made the video asked rhetorically. Join my group chat. This address certificate can be changed by my team.”
The designer said that Taobao buyers from the mainland can get “proof of address” or “overseas professional customization.”
CNBC said it was easy for Binance clients to fake KYC credentials.
I worry about being on the National Security Council or the main Justice Council. Meghji told CNBC that this is something that worries her at the IRS.
Richards told CNBC that Binance’s financial partners, like Visa or a customer’s bank, would be worried about unauthorized access. When Binance users withdraw money to their checking accounts at JPMorgan Chase, it could cause problems.
Richards said that Chase would know where the money from Binance goes. “Funding could be risky if they know Binance is a problem,”
CNBC asked Binance to say something about the many postings and messages about this article. They got those emails and posts from CNBC, but they were deleted.
After CNBC’s answer, tweets said that Binance debit cards had been frozen.
“Why is my Binance card frozen?” asked a customer from China.
The worker told the customer to file a complaint with Binance’s banking partner.
“How do people who want a Binance card know which bank is issuing it?” asked the user.
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