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Binance focuses on security as crypto crimes hit $20bn

Crypto exchange auBinance has held workshops with Dubai Police and authorities across the GCC to increase learnings around crypto crimedit and investigations departments are tackling crypto transaction crimes Unsplash/benchaccounting
Binance has held workshops with Dubai Police and authorities across the GCC to increase awareness of crypto crime
  • Crypto crime still miniscule compared to traditional financial scams
  • Middle East not as badly affected as other parts of the world 

Cryptocurrency crime reached a record $20.1 billion last year according to blockchain analysis company Chainalysis, but Binance’s security chief says this is still little compared to traditional financial scams.

Nils Andersen-Röed, deputy head of financial crime compliance at Binance, argues the sum must be put into context.

“There seems to be a misconception about the relative size of cryptocurrency-related crime and traditional financial crime, because it’s a small percentage,” he told AGBI.

“Transactions involving illicit addresses represented just 0.15 percent of cryptocurrency transaction volume in 2021.

“This is the perspective to keep in mind when we’re talking about cryptocurrency-related crimes.”

Illicit proceeds from traditional financial crime are estimated to account for 2-5 percent of global GDP – around $2 trillion, according to the United Nations Office on Drugs and Crime (UNODC).

Andersen-Röed spent 10 years with the Dutch National Police investigating organised crime before switching to the Darknet unit, a pilot project in which he helped crack two of the largest criminal dark web markets, AlphaBay and Hansa.

He joined Binance in September 2021.

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Nils Andersen-Röed, deputy head of financial crime compliance at Binance, worked for the Dutch National Police investigating organised crime. Picture: Binance

“I’ve heard terrible stories from people who have fallen victim to scams by transferring cryptocurrencies to investment schemes,” Andersen-Röed said.

“We try to map out these networks. But the hard truth is it isn’t always easy.”

Andersen-Röed revealed that, since November 2021, Binance has received over 47,000 requests from law enforcement to trace illicit funds.

This included freezing $6.8 million from transactions linked to the Ronin bridge hack, where more than $600 million was taken from the play-to-earn, non-fungible token game, Axie Infinity.

The Binance exchange has a 24-hour average trading volume of $65 billion and over 350 cryptocurrencies listed, with more than 120 million users.

Andersen-Röed said his team had increased 500 percent over the last year to 750.

“It’s our top priority to keep the platform safe and the money users invest in the platforms safe,” he said.

“Binance is expanding into different markets, and we’re getting registrations and licenses to operate in different countries. This means you’ve got to build out your compliance staff.”

The main crime areas, based on analysis reporting, revolve around stolen funds and scams, with problems such as terrorism financing forming a small percentage.

Threats to security have been detected across South East Asia, Eastern Europe and in central Africa.

“We’re investigating scam networks by tracking the money. Most of the scam/criminal networks we’re investigating point to other geographic areas [and not the Middle East]. But of course that doesn’t mean there aren’t any victims in this region” Andersen-Röed said.

According to a survey from Kaspersky, half of respondents had been affected by cryptocurrency crime in some way.

It revealed that concerns in the UAE and Saudi Arabia are crypto-investment fraud (70 and 73 percent respectively), fake crypto-currency apps in the UAE (71 percent), and fake crypto-exchanges (86 percent) in Saudi Arabia.

Andersen-Röed said Binance has held over 70 workshops globally with law enforcement, including Dubai Police and authorities across the GCC, to increase the learnings around crypto crime.

In 2021 cryptocurrencies, particularly Bitcoin and Ethereum, were setting all-time highs but last year prices tumbled, wiping out more than $1.4 trillion in the market. 

The year finished with the high-profile collapse of FTX, one of the world’s largest cryptocurrency exchanges, run by Sam Bankman-Fried.

Public trust in cryptocurrencies remains low, with critics concerned about the industry’s lack of regulation and accountability, and its links with money laundering and other crimes.

But Binance reported a 34 percent rise in the number of new Middle East and North Africa institutional investors during the last quarter of 2022 – the highest growth of all regions.

Globally, Binance recorded 65 percent growth in its VIP and institutional business in 2022, according to the company’s end-of-year operations report published last month.

However, Maurice Gravier, chief investment officer at Emirates NBD Group, Dubai’s largest bank, said he has not noticed massive investment from institutions. 

“The major cryptocurrencies lost 80 percent last year,” he said. “I haven’t seen much investment from institutions. It seems to be more of a retail thing now.”

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