Bad News: When Your Ethics and Compliance Officer Is Charged with Helping Your Customers Evade the Law

For all the crypto currency fans out there who have been saying, “What could possibly go wrong?” in a financial industry no one can explain, and, as if FTX was not enough, we have this:

Samuel Lin, the compliance chief for Binance Holdings Ltd. from 2018-2022, has been sued by the U.S. Commodities Futures Trading Commission (CFTC) with willfully aiding and abetting his company in evading U.S. laws. Interpretation:  the compliance officer set up a system for evasion of his own compliance controls.

And, Binance has refused to provide the CFTC with Mr. Lim’s residential address in Singapore so that he can be served with an investigative subpoena.

The complaint alleges that Binance, despite its denials, has long been soliciting customers in the United States. Binance was soliciting U.S. customers through a complex structure to evade U.S. laws and regulations.  The company used personnel and vendors in the United States and actively cultivated VIP customers in the United States.  However, the complaint also alleges that once customers were hooked, Mr. Lim helped them evade compliance controls.  Mr. Lim  told customers to use VPNs to avoid Binance’s internet protocol address-based controls.  Off-shore companies were the recommended tool for evading Binance’s anti-money laundering controls.

The complaint in the suit provides lesson in the following axioms:

(a) If you are doing stuff that just might cross a line here and there, don’t brag about it in e-mail; and

(2) “Criminals are Stupid” — the title of the Barometer’s criminal law professor’s book about his experiences as a prosecutor.

Some gems from the complaint in Commodities Futures Trading Commission v.Changpeng Zhao, Binance Holdings Limited, Binance Holdings (IE) Limited, Binance (Services) Holdings Limited, and Samuel Lim

Binance has been aware that its compliance controls have been ineffective. As Lim—at the time Binance’s CCO—recognized in an October 2020 chat with other Binance compliance personnel, Binance’s compliance environment has amounted to “email sending and no action . . . for media pickup . . . I guess you can say its ‘fo sho.’”

As part of an audit for a customer, the Binance employee who held the title of Money Laundering Reporting Officer (“MLRO”) lamented that she “need[ed] to write a fake annual MLRO report to Binance board of directors wtf.” Lim, who was aware that Binance did not have a board of directors, nevertheless assured her, “yea it’s fine I can get mgmt. to sign” off on the fake report. Around the same time as the referenced “half assed” compliance audit.”

In November 2020 the MLRO exclaimed to Lim in a chat, “I HAZ NO CONFIDENCE IN OUR GEOFENCING [screening out customers from certain countries, e.g., the U.S.].

in February 2019, after receiving information “regarding HAMAS transactions” on Binance, Lim explained to a colleague that terrorists usually send “small sums” as “large sums constitute money laundering.” Lim’s colleague replied: “can barely buy an AK47 with 600 bucks.”

And with regard to certain Binance customers, including customers from Russia, Lim acknowledged in a February 2020 chat: “Like come on. They are here for crime.”  Binance’s MLRO agreed that “we see the bad, but we close 2 eyes.”

Yes, indeed, it was a web of crime and Binance officers, such as they were, had their eyes wide shut.  Alleged crime, and alleged eyes shut that is.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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