Britain’s Binance Ban Illustrates that Even the Largest Exchanges Face AML Inadequacies

  • Trading Systems , AML and KYC , Financial
  • 01.07.2021 09:40 am

This weekend, Britain’s Financial Conduct Authority announced that Binance Markets Limited is currently “not permitted to undertake any regulated activity” in the United Kingdom. Last month, Binance Markets Limited withdrew its 5MLD application, and all parties seem to agree that the latest developments did not come as a surprise.

“This is a situation where size doesn’t matter,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges. “Traditionally we think that the biggest entities have the easiest time dealing with compliance issues, thanks to significant legal resources at their disposal. While that may be true, they’re still bound to the same rules and regulations as others face. A small investment in compliance on the front end can save exchange operators significant losses on the backend.”

Additionally, the company must post the following notice on its website and apps for users originating from the United Kingdom:

BINANCE MARKETS LIMITED IS NOT PERMITTED TO UNDERTAKE ANY REGULATED ACTIVITY IN THE U.K. Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA. (No other entity in the Binance Group holds any form of U.K. authorisation, registration or license to conduct regulated activity in the U.K.).

“In essence, while Binance Markets Limited is banned from offering regulated services, Binance is still allowed to allow those living in Britain to trade cryptocurrencies via What’s interesting about this is that the company is said to have withdrawn its application to register with the Financial Conduct Authority because of anti-money laundering requirements. Binance is the largest crypto exchange on the planet, and, yet, compliance became an issue,” noted Gardner.

According to CNBC, an CFA spokesman offered that “Binance Markets Limited withdrew their 5MLD application on 17 May 2021 following intensive engagement from the FCA. The action taken today on Binance Markets Limited has been in train for some time.”

As regulators continue to grapple with how they treat cryptocurrency exchanges, it is more important than ever for exchange operators to deal with regulatory issues, including anti-money laundering and terrorism financing, on the front end. So often, operators are in a mad dash to market, trying to launch their exchange quickly, and they don’t see the forest through the trees. Compliance issues and security should all be part of the conversation as operators begin to build out their technology. Compliance is more than a nuisance to procrastinate on. Failure to comply with budding regulations could shut an enterprise down before it even begins,” explained Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

Currently the market is such that compliance and security are thought of as costs to be avoided. However, the exchanges which invest in their security, and those which invest in their ability to meet or exceed regulatory requirements --- those are the entities that will succeed over the long-haul,” opined Gardner.

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