French authorities have been investigating Binance for multiple alleged violations since February 2022, according to a local news report. The Paris prosecutor’s office told local media that the investigation against the largest crypto exchange is twofold.
First, authorities are investigating whether Binance recruited French users and was operating in the country without a license as a result. Second, they investigate “acts of aggravated money laundering, through participation in investment operations, concealment, conversion, the latter being carried out by perpetrators of crimes that generated profits.”
Aggravated money laundering refers to cases of systematic money laundering or cases involving large amounts of laundered money involving multiple launderers. Local media reported that authorities believe Binance failed to meet its know-your-customer (KYC) and anti-money laundering (AML) obligations.
It is worth noting that Binance did not implement mandatory KYC verification until August 2021.
Suspicions of illegal operations
Since 2019, crypto exchanges are required to obtain a DASP (Digital Asset Service Provider) license and register with the Financial Markets Authority (FMA) to operate in France. Without the license and registration, crypto companies are not allowed to advertise their services to French consumers.
Binance became a fully regulated crypto exchange in France in May last year. However, the exchange has been providing services in the country since 2020, according to the local news report. Authorities likely suspect that Binance illegally advertised and promoted its services in the country to attract potential French users before obtaining its license.
Such suspicions echo allegations filed against the exchange by the U.S. Securities and Exchange Commission (SEC) earlier this month. In its lawsuit, the SEC alleged that Binance illegally acquired US customers, mixed user and corporate funds, and failed to comply with anti-money laundering regulations.
Binance is cooperating with authorities
That says a spokesperson for Binance CryptoSlate that the exchange works closely with regulators to meet all compliance requirements. The spokesperson added:
“Binance invests significant time and resources in cooperation with law enforcement worldwide. We abide by all laws in France, as in every other market in which we operate. “
While the exchange declined to comment on ongoing investigations, the spokesperson said Binance had a site visit from French authorities last week. Such visits by regulators and inspectors are part of the legal obligations of financial companies in the country, the spokesman said.
The prosecutor’s office stated that the documents and computers collected during these searches at Binance premises will be the “subject of an in-depth investigation”.
The Binance spokesperson claimed that the exchange’s user information is “securely held and only disclosed to government officials upon receipt of documented appropriate justification”.
News of the probe comes on the same day Binance announced it was pulling out of the Netherlands after failing to secure a license.