The Financial Crimes and Enforcement Network (FinCEN) released a report on Bitzlato, a Russian P2P exchange, and identified two of its top counterparties as Binance and Hydra, a darknet marketplace.
It is alleged that Bitzlato had weak KYC policies, allowing users to sign up with only an email address and no photograph, and facilitated $700 million to cover up transactions involving drugs and illegal gambling services.
In response, the U.S. Department of Justice announced the National Cryptocurrency Enforcement Team in 2021 to combat financial crimes and money laundering.
Breon Peace, U.S. attorney at the Brooklyn, New York office that is prosecuting the case, said that Bitzlato allegedly made the exchange a haven for criminals.
The DoJ and IRS have requested key compliance information from Binance in 2021, and the DoJ has asked for thorough records of Binance’s AML/KYC processes as well as correspondence between senior employees on detecting illicit transactions. The outcome of the request is yet to be seen.