How Binance Will Open All Its Activity to the U.S. Government - Ep. 581
Unchained
Navigating Compliance Monitorships
This chapter explores the critical role of compliance monitors in enforcing regulatory agreements, particularly within companies operating internationally. It examines the factors influencing the imposition of monitorships by the Department of Justice and their potential impact on industry best practices.
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The record $4.3 billion settlement reached between Binance and the U.S. government over charges of money laundering and sanctions violations calls for the world's largest crypto exchange to maintain an independent compliance monitor for the next five years. Michael Dawson, a partner at WilmerHale, and Dorothy DeWitt, founder and CEO of Tolt Strategies, a former director at the CFTC and former general counsel at Coinbase, dissect the intricacies of this arrangement, delving into the roles and responsibilities of the compliance monitor, the potential impact on Binance's operations and the broader implications for the crypto industry.
Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform.
Show highlights:
- what exactly is a compliance monitor, and why it's essential in the Binance settlement
- which regulatory agencies the monitors report to and their significance
- why the DOJ insisted on including a compliance monitor in its settlement with Binance
- how Binance’s compliance monitor is expected to create a “ripple effect across the industry,” according to Michael
- why Binance, despite being a non-U.S. entity, is subject to a U.S.-appointed monitor
- Dorothy's perspective on why more monitorships might be appointed in the crypto industry going forward
- how much the monitorship will cost Binance and the factors influencing their choice of monitor
- whether the government will be able to discover other crimes with all this new information, which will be used by other agencies such as the IRS and the FBI
- who might be appointed as the compliance monitor for Binance and why Michael favors Patrick McHenry
- what constitutes the SAR lookback and AML program consultancy
- what could happen when the government gets to look at all past transactions
- what happens if the monitor discovers any wrongdoing within Binance
- whether the monitorship is likely to impact Binance's business operations
- advice from Dorothy and Michael for Binance's new CEO on navigating these challenges
- why predicting the future of Changpeng Zhao, Binance's ex-CEO, is complex, according to Dorothy
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Guests:
- Michael Dawson, partner, Financial Institutions Group at WilmerHale
- Dorothy DeWitt, founder and CEO of Tolt Strategies and former Director of the Division of Market Oversight at the CFTC
Links
Settlement
- DOJ Settlement Text
- FINCEN Settlement Text
- CFTC Settlement Text
- OFAC Settlement Text
- WSJ: Binance Penalties Include a Number of Crypto Industry Firsts: The Treasury Department’s FinCEN is imposing its first-ever monitorship on the cryptocurrency exchange
- CoinDesk: Binance's Future and Other Questions Post-Settlement
- Unchained: Binance to Pay $4.3B Penalty to Resolve U.S. DOJ Criminal Investigation; Changpeng Zhao Resigns, Pleads Guilty to Money Laundering Charges
- Law360: Binance's Compliance Chief Is Optimistic About Monitorship
The CFTC’s guidance on monitorships
Other monitors at crypto companies
- Coinbase (independent monitor): Press Release- January 3, 2023: Superintendent Adrienne A. Harris Announces $100 Million Settlement with Coinbase, Inc. after DFS Investigation Finds Significant Failings in the Company’s Compliance Program | Department of Financial Services
- Robinhood Crypto (independent compliance consultant): Press Release- August 2, 2022: DFS Superintendent Harris Announces $30 Million Penalty on Robinhood Crypto for Significant Anti-Money Laundering, Cybersecurity & Consumer Protection Violations | Department of Financial Services (ny.gov)
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