Binance collaborates with law enforcement as crypto crime decreases

In 2023, there was a marked drop in crypto crime, with less value being received by illicit crypto addresses and a shrinking share of illicit transactions. This was driven by increased industry-wide security and compliance efforts and better collaboration with law enforcement partners.

According to Chainalysis’ 2023 report, arguably the most illustrative of crypto-related crime metrics, the share of illicit transactions in the overall crypto transaction volume, went down from 0.42% to 0.34%. Leading this positive shift was Binance, a key player in the digital asset ecosystem.

“There is often a paradoxical understanding of blockchain,” says Nils Andersen-Röed, Global Head of Law Enforcement Response and Deputy Head of Financial Crime Compliance at Binance, a unit composed of the industry’s top investigators, blockchain analysts, and former law enforcement agents. “We can identify the exact point of illicit activity on the blockchain, yet people will continue to believe it’s anonymous and can’t be tracked. The fact is that blockchain creates a traceable record, and we can track funds often more easily than other financial systems.”

Every year, nearly $2 trillion of government-issued currency (almost 5% of global GDP) is laundered through banks and other traditional institutions, and many of these transactions and activities are untraceable. By contrast, transactions using blockchain technology—which underpins most cryptocurrencies—are public and traceable. As a result, blockchain technology has proven to be one of the most powerful tools for authorities and companies’ anti-money laundering efforts.

Harnessing blockchain’s transparency and traceability

Blockchain is essentially a digital public ledger that anyone can view. Each transaction is time-stamped, and the identification numbers of the digital wallets involved in the exchange are public. This means that transparency is hardwired into cryptocurrencies using blockchain technology.

As a global leader in the digital asset ecosystem, Binance has access to expansive datasets of transactions, giving it the ability to access comprehensive mapping and identification of potentially illicit activities in the crypto industry.

“The share of cryptocurrency transactions tied to illicit actors is small,” says Andersen-Röed “But when digital assets are used in illicit activities, we have the infrastructure needed to identify it in real-time.”

While blockchain data is transparent, making connections to illegal activity requires the right tools. When investigating a potential financial crime, Binance partners with external data platforms such as Chainalysis, which can analyse transaction flows, to build a ‘knowledge graph.’ These graphs combine blockchain information with other data—information from the dark web along with regular websites, forums, social media, and other online destinations with which the user is associated. The goal is to connect the dots of one transaction to related transfers, real-world activities, and events. “In 2023, Binance responded to nearly 60,000 law enforcement requests with an average response time of 72 hours.”

The blockchain knowledge graph can be used not only to track existing activity but to also glean insights that can prevent crime. Binance uses the information it gathers to stop bad actors before they become a threat to users. But even if a crime does take place, the work of compliance and investigations experts at Binance increases the chances of victims’ funds being recovered and perpetrators being identified and prosecuted.

“We are a very user-focused company,” says Andersen-Röed. “The work that we do is our way of protecting our user base while building trust and confidence with the public.”

Forging deep partnerships with law enforcement

To promote greater security and consistent monitoring standards across the industry, Nils and a team of 122 investigators at Binance work closely with law enforcement agencies around the world. Andersen-Röed further adds, “We are seeing an increased demand in training to help educate on and help combat crypto crimes. To meet that demand, we have bolstered our team to conduct more training and work hand-in-hand with regulators and law enforcement across the globe.”

Binance’s Global Law Enforcement Training Program, designed to help agencies detect cyber and financial crimes, was formally launched in 2022. The standard one-day training program includes in-person workshops on the fundamental concepts of blockchain and crypto assets, as well as insight into the evolving legal and regulatory environment in which digital asset organisations operate. The initiative has included more than 120 on-site and online trainings for enforcement agencies in more than 20 countries in 2023 alone.

Between 2022 and 2023, the amount Binance committed to its compliance program went up from $158 million to $213 million, marking a 35% increase. The company invests in world-class talent, building or acquiring industry-leading technology, and putting in place efficient policies and processes.

“We are seeing an increased demand for training to help educate on and combat crypto crimes,” says Andersen-Röed. “To meet that demand, we have bolstered our team to conduct more training and work hand-in-hand with regulators and law enforcement across the globe.” Nils and the Binance Investigations team assist law enforcement agencies around the world in hundreds of financial-related cases, including nation-state actors, terrorism financing, child abuse, and corruption at the highest levels of government. Having handled more than 60,000 inquiries from international law enforcement agencies in 2023, helping secure and recover millions of misbegotten funds. For example, in 2023, Binance worked with U.S. federal agencies to freeze more than $4.4 million in funds tied to North Korean cybercrime groups.

In another recent investigation, the team aided Thai law enforcement in dismantling an extensive pig butchering scam—a type of fraud involving an array of persuasion tactics to cultivate trust with victims, spurring them to invest in a fraudulent platform—that affected thousands of people.

“We can’t always share details publicly about all of these cases, but this is what drives my team,” states Andersen-Röed.

“Seventy-five per cent of us are former law enforcement, and it’s a very dedicated group. When you identify a potential terrorism campaign and it leads to someone being arrested and stopped, it shows the work we do directly impacts people.” At Binance, the overall goal is to create a digital asset and environment that is safe and secure so that it can continue to grow. This means that Nils and his team will continue to implement measures to identify and stop unlawful activity. “When we can all work together, it’s a force multiplier because our goals are the same. We’re all here to stop bad actors from leveraging any part of the financial system for ill-gotten gains,” concludes Andersen-Röed. “It protects our users and keeps the crypto ecosystem safe for all.

Risk Warning: Digital asset prices are subject to high market risk and price volatility. The value of your investment may go down or up, and you may not get back the amount invested. You are solely responsible for your investment decisions, and Binance is not liable for any losses you may incur. Past performance is not a reliable predictor of future performance. You should only invest in products you are familiar with and where you understand the risks. You should carefully consider your investment experience, situation, investment objectives, and risk tolerance and consult an independent financial adviser before investing. This material should not be construed as financial advice. For more information, see our Terms of Use and Risk Warning.

#FeaturedArticle