Reading this on Krawl? Register for free.
Unlock listen-aloud, reading history and personalised feeds — at zero cost.
Free registration unlocks the full Finance Desk
Binance Used to Circumvent Iran Sanctions, Facilitating Billions in Illegal Transfers
Binance has enabled Iranian users to bypass international sanctions, processing over USD8bn in transfers linked to Iran since 2018. Despite publicly stating compliance, the exchange’s lenient identity verification facilitated illicit transactions.
Binance's Sanctions Evasion Activities
Since 2018, Binance has processed more than USD 8 billion in transactions from Iranian users, enabling them to circumvent international sanctions. Despite publicly affirming its commitment to compliance and sanction adherence, Binance permitted Iranian entities to maintain accounts and conduct transfers through its platform until at least late 2023.
Reports indicate that Binance’s relaxed know-your-customer (KYC) protocols facilitated this activity. Until recently, users could create accounts with minimal identity verification, requiring only an email address. This enabled individuals in sanctioned jurisdictions to trade cryptocurrencies, effectively bypassing financial controls.
One such instance involved Babak Zanjani, an Iranian national sanctioned by the US for money laundering. He was identified making transfers on Binance in 2015. Additionally, Changpeng Zhao, Binance's founder, pleaded guilty in 2023 to anti-money laundering violations and is scheduled for sentencing in 2024. These cases highlight the exchange's historical issues with regulatory compliance.
Internal documents from Binance revealed that the exchange was aware of its role in facilitating transactions for Iranian users. A 2020 report noted that Binance was the primary exchange for Iranian crypto users. While Binance implemented some restrictions, such as blocking new Iranian registrations, existing accounts continued to operate for an extended period.
US law enforcement officials and financial regulators have intensified their scrutiny of Binance. Investigations into the exchange include probes into its anti-money laundering practices, sanctions evasion, and transfers to illicit organizations like Hamas, Hezbollah, and Yemeni Houthis.
Lack of KYC and Regulatory Scrutiny
Binance's historical lack of robust identity verification has been a recurring concern for regulators. The exchange allowed users to conduct significant transactions, sometimes exceeding USD 100,000, without full identity checks. This policy made it challenging for authorities to trace the origin and destination of funds, increasing the risk of money laundering and sanctions violations.
A spokesperson for Binance stated that the company adheres to international sanctions and does not permit sanctioned individuals or entities to use its platform. However, the reported activities suggest a gap between policy and practice. The spokesperson added that Binance collaborates with law enforcement globally to combat financial crimes.
Binance’s internal communications highlighted the company's awareness of its shortcomings. A 2020 internal report acknowledged the platform’s role in enabling crypto transactions for Iranian users, despite the prevailing sanctions regime. The report identified Binance as a major conduit for Iranian crypto flows.
In 2023, Binance agreed to pay USD 4.3 billion in penalties to US authorities for anti-money laundering and sanctions violations. The settlement agreement included a deferred prosecution agreement and the appointment of an independent monitor to oversee Binance's compliance efforts for three years.
Broader Implications for Crypto and Sanctions Enforcement
The Justice Department's investigation into Binance began after a 2021 Reuters report exposed the exchange's lax compliance with sanctions. This led to a series of inquiries and enforcement actions against Binance, culminating in the 2023 settlement. The case underscores the challenges of enforcing traditional financial regulations within the decentralized crypto ecosystem.
Treasury officials noted that Binance processed transactions for sanctioned entities and individuals, including those in Iran, without proper oversight. This included USD 1.1 billion in transactions for Iranian users in 2022 alone. The case serves as a reminder of the potential for crypto platforms to be exploited for illicit activities, prompting increased regulatory attention on the sector.
The US government has stated that crypto exchanges, like traditional financial institutions, must adhere to sanctions laws. Treasury officials emphasized that digital assets, regardless of their technological structure, are not exempt from compliance obligations.
Another former Binance executive, Samuel Lim, faces charges for conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and money laundering. These charges stem from allegations that Lim helped Binance evade US sanctions. Lim has pleaded not guilty, and his trial is scheduled for 2025.
In 2023, a report identified 47 cases where cryptocurrencies were directly converted to fiat currency, or vice versa, in Iran. These transactions, valued at USD 1.5 billion, highlight the use of digital assets for bypassing traditional financial channels. The report also found 24,000 wallets linked to Iran on Binance, with over USD 10 billion in transactions between 2018 and 2024.
The Zanjani case, involving a major Iranian financier, illustrates how individuals use crypto to navigate sanctions. Zanjani established a network of shell companies and used crypto to move funds, further complicating the efforts of sanctions enforcers.
The lack of robust KYC on many platforms, particularly in the past, has allowed sanctioned entities to move funds globally. This has prompted calls for stricter regulatory oversight and improved compliance measures across the crypto industry.
Found this useful? Share it!
Interested in Finance Education?
Explore our CFA and investing courses — built for serious learners.
