Binance agreed with the Department of Justice as part of its arrangement with the U.S. government wherein it paid over $4 billion in fines to have an external regulator. To do this, the Department of Justice (DOJ) has per a Bloomberg report appointed Forensic Risk Alliance (FRA) as the external regulator for Binance.
This decision comes to ensure compliance with regulatory requirements and be more transparent in the industry. FRA is one of the few firms that applied for the position alongside others like Sullivan & Cromwell that consulted for FTX before its collapse.
Forensic Risk Alliance (FRA) is a global forensic accounting and compliance consulting firm that helps organizations navigate complex regulatory challenges, investigations, and disputes.
The FRA provides forensic consulting services to help organizations absorb, adapt, and respond to risk, particularly in financial fraud, corruption, and regulatory issues.
FRA’s approach involves continuous collaboration with clients and communications with counsel, drawing on various specialists including forensic accountants, financial analysts, certified fraud examiners, certified forensic professionals, forensic technologists, and former law enforcement.
As part of the agreement, the FRA will monitor the exchange’s activities, conduct audits, and evaluate compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. FRA will also give reports to the US government to share vital information about the business activities of Binance.
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Additionally, FRA will have unrestricted access to Binance’s internal records, facilities, and employees. This access will enable FRA to conduct thorough investigations and assessments of Binance’s operations.
Binance has been embroiled in a legal battle with U.S. regulators over allegations of operating illegally in the country and violating numerous financial laws.
The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its CEO Changpeng Zhao, accusing them of cultivating U.S. business while failing to register properly with authorities.
The CFTC alleged that Binance used an “intentionally opaque” global corporate structure to escape oversight and evade compliance rules to maximize profits.
In a separate case, the U.S. Securities and Exchange Commission (SEC) charged Binance and its U.S. arm with operating as unregistered securities exchanges, broker-dealers, and clearing agencies. The exchange was also accused of commingling or diverting customers’ assets and engaging in wash trading.
In November 2023, Binance and its CEO pleaded guilty to federal charges in a $4.3 billion resolution, with Zhao stepping down as CEO and was sentenced to four months in April 2024.
