Analyzing the Binance Operational Oversight Guidelines Released by the U.S. Department of Justice
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Analyzing the Binance Operational Oversight Guidelines Released by the U.S. Department of Justice
Binance is undergoing an unprecedented, government-level comprehensive review.
Navigating Web3 tides with focused insightsBy Aiying
The U.S. Department of Justice (DOJ) has recently released a batch of documents related to Binance, directly exposing the DOJ's current strict and robust regulatory measures against the company.
At the same time, in the ongoing enforcement action by the SEC against Binance, the SEC has begun incorporating facts from the DOJ’s plea agreement with Binance into its own current enforcement proceedings against Binance and its founder, Changpeng Zhao (CZ).
1. The publicly available records of the DOJ-Binance plea agreement now include a large number of previously undisclosed key attachments
Among these newly disclosed materials, three documents stand out:
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Binance’s admitted “Statement of Facts” (Attachment A to the plea agreement);
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the “Compliance Commitments” (Attachment C to the plea agreement); and
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the description of the DOJ’s role in “Compliance Oversight” (Attachment D to the plea agreement)
The breadth and scope of the DOJ’s compliance oversight—combined with supervision imposed by the Financial Crimes Enforcement Network (FinCEN) and Binance’s related compliance commitments—is highly significant. In fact, such DOJ/FinCEN oversight over a global financial firm is unprecedented.
For example, the DOJ’s compliance commitments require an unprecedented level of compliance, including new procedures relating to:
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policies, procedures, and internal controls;
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customer and third-party relationships; anti-evasion controls;
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periodic reviews; appropriate oversight and independence;
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training and guidance; comprehensive reporting and investigations;
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enforcement and discipline; and monitoring, testing, and auditing.
Binance’s new list of compliance commitments is so exhaustive it resembles a consulting firm’s wish list—the implementation and execution of which will cost tens or even hundreds of millions of dollars.
Likewise, the scope of the DOJ’s compliance oversight is so broad and comprehensive that the DOJ used 13 pages just to outline Binance’s obligations. Compliance Oversight Document
The DOJ’s extensive involvement following the plea agreement is particularly striking. The responsibilities and powers of the DOJ’s oversight, along with Binance’s obligations to the overseers, will be managed by the DOJ’s Criminal Division, Money Laundering and Asset Recovery Section; National Security Division; Foreign Intelligence and Export Control Section; and the U.S. Attorney’s Office for the Western District of Washington. This essentially covers all divisions within the DOJ capable of bringing criminal charges for any form of financial fraud.
Meanwhile, the level of cooperation required from Binance is substantial. Binance must facilitate the monitor’s access to the company, documents, and resources, and provide all information, documents, records, facilities, and personnel as reasonably requested by the monitor. Binance must also use its best efforts to provide the monitor with access to former employees, agents, intermediaries, advisors, representatives, distributors, licensees, contractors, suppliers, and joint venture partners.
In certain cases, the monitor may even choose not to inform Binance of their findings. In practice, under certain circumstances, the monitor must immediately report potential misconduct directly to the government rather than to Binance. According to the explicit terms of the agreement, if the monitor believes any potential misconduct has occurred that could constitute criminal or regulatory violations, they are obligated to report such misconduct to the government.
2. Under FinCEN’s Consent Order, Binance is required to hire a monitor for five years, whose primary duties include:
Assessment and Supervision – examining whether Binance complies with the terms of the Consent Order, especially the obligations outlined in Section Six, to reduce the risk of future violations by Binance.
Effectiveness Evaluation – assessing Binance’s compliance with relevant provisions of the Bank Secrecy Act (BSA) and applicable implementing regulations for money services businesses (MSBs), beyond the ongoing reporting requirements for transactions occurring on or after the date the Consent Order was signed (i.e., this exception does not apply to the “SAR Lookback” review described in subsection C of Section Six, for which Binance must submit reports).
Management Commitment – evaluating and supervising senior management’s commitment to and effectiveness in executing Binance’s anti-money laundering and sanctions compliance program.
Compliance Assessment – overseeing Binance’s adherence to the settlement agreement with the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), the consent order with the Commodity Futures Trading Commission (CFTC), and the plea agreement with the U.S. Department of Justice (collectively referred to as the “Mandated Requirements”).
3. Binance is undergoing an unprecedented, government-level, comprehensive review
Under the terms of the settlement agreements, Binance must grant the U.S. Department of Justice (DOJ), the Financial Crimes Enforcement Network (FinCEN), and various other financial regulators and law enforcement agencies immediate, multi-year access and audit rights—effectively subjecting the company and its customers to a 24/7, year-round financial health check.
This multi-layered monitoring not only provides valuable opportunities for law enforcement and regulatory investigation and litigation teams to continuously uncover new incriminating evidence, but also allows other government agencies—particularly the Securities and Exchange Commission (SEC), which is still engaged in intense legal battles with Binance and its CEO Changpeng Zhao—to contact the monitors, request documents, conduct inquiries, and even call them as witnesses in court.
At the same time, the monitors will regularly provide information streams to FinCEN, which may, at its discretion, share this information with other government agencies. Binance is facing an unprecedented level of government scrutiny—both in depth and breadth—unlike anything seen before.
Per the settlement agreements, Binance must provide uninterrupted access, audit, inspection, and examination rights to the U.S. Department of Justice (DOJ), the Financial Crimes Enforcement Network (FinCEN), and various financial regulatory and law enforcement agencies for multiple years. This means the company and its clients will undergo continuous, round-the-clock, year-round rigorous financial scrutiny.
Meanwhile, these multiple oversight mechanisms undoubtedly offer a unique opportunity for law enforcement, regulatory investigators, and litigation teams to continually discover and leverage newly emerging incriminating evidence.
During this process, there is no legal prohibition preventing other government agencies—especially the Securities and Exchange Commission (SEC), which remains locked in active and contentious litigation with Binance and CZ—from contacting these monitors to ask questions, request documents, take depositions, or even present the monitors as witnesses in judicial proceedings. Additionally, the monitors may continuously provide information to FinCEN, which can then, at its sole discretion, share that information with other government agencies.
In fact, the FinCEN Consent Order appears to anticipate referrals to law enforcement and regulatory authorities, stating: “These [various oversight] reports will likely contain proprietary, financial, confidential, and competitively sensitive business information. Moreover, public disclosure of these reports could hinder cooperation or interfere with ongoing or potential government investigations, thereby undermining the objectives of the monitoring. Therefore, for these reasons, the reports and their contents are intended: (i) solely for use by FinCEN, the Office of Foreign Assets Control (OFAC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice; and (ii) to remain non-public unless mutually agreed in writing, or unless FinCEN, in its sole judgment, determines further dissemination is necessary to fulfill its duties and responsibilities, or as otherwise required by law.”
4. Future Outlook
The reality is that neither Binance nor any other major cryptocurrency company—or indeed any financial firm in the world—has ever experienced a government regulatory regime as strict, powerful, and comprehensive as what the U.S. Department of Justice (DOJ)/Financial Crimes Enforcement Network (FinCEN) is now imposing on Binance. The oversight Binance has agreed to accept—and pay for—is akin to installing surveillance cameras on every member of a global criminal drug cartel and requiring the cartel itself to fund a team of seasoned, highly qualified former and current government agents to conduct round-the-clock monitoring.
I believe it is impossible for a secretive and opaque financial entity like Binance to suddenly transform into a law-abiding, open, transparent, compliant, and government-friendly traditional financial institution. Even audits by the Securities and Exchange Commission (SEC) would be extremely challenging for Binance’s already strained infrastructure, let alone audits by the DOJ/FinCEN—which are nearly impossible.
It may only be a matter of time before Binance’s entire plea agreement collapses, leading to additional charges against Binance, further charges against CZ, and new allegations against anyone else linked to Binance’s criminal enterprise—including partners, customers, joint ventures, collaborators, and others.
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