Binance banked millions in funds, but forgot the paperwork, Columbia University professor says

Recent developments surrounding cryptocurrency exchange Binance have sparked a major controversy surrounding the US crackdown on cryptocurrency companies. According to Omid Malkan, an associate professor at Columbia Business School and the author, the Justice Department’s approach to this issue is very different from the approach we see in traditional finance.

“People who honestly believe that crypto is a unique enabler for bad people to do bad things don’t understand how the rest of the financial system actually works.” he wrote Malkan on X (formerly Twitter), adding that companies following anti-money laundering best practices are still processing large amounts of illicit funds. “But it was all considered good because someone did the paperwork.”

Malkan also argued that many on Wall Street would go to prison if traditional companies received the same treatment as Binance has received in similar cases.

“If they had complied with the Binance standard, there would have been hundreds of CEOs in jail and less money for shareholder buybacks (or lobbying). But the bankers were smart enough not to question the game at all.”

Despite the criticism, Malkan believes the exchange still “was wrong to lie to its customers and was wrong to not comply.” Binance and its co-founder, Changpeng “CZ” Zhao, recently reached a $1 billion settlement with the US government for allegedly allowing individuals involved in illicit activities to move “stolen funds” through the exchange. CZ stepped down as CEO as part of the deal.

Malkan also praised Binance’s contribution to financial inclusion in recent years:

It has done a reasonably decent job of integrating tens of millions of poor, black, and other disenfranchised people into the financial system, something that the world’s complacent financial companies have chronically failed to do.

ICIJ’s investigation into global money laundering

Some of the world’s largest banks allowed trillions of dollars to be laundered by criminals, according to leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ).

Investigation, Released in September 2020, analyzed more than 2,100 suspicious activity reports (SARs) involving transactions worth more than $2 trillion between 1999 and 2017 that were flagged as potential money laundering or criminal activity by internal compliance officers at financial institutions. Banks that facilitate these transactions include large institutions such as Bank of New York Mellon, Deutsche Bank, and HSBC.

ICIJ organized more than 400 journalists from 110 news organizations in 88 countries to investigate banks potentially involved in money laundering.