What information should be paid attention to when Binance assists law enforcement agencies?

Author: Colin Wu

Author: Colin Wu

Recently, some Binance users in the Chinese community found that their accounts were temporarily suspended due to the request of some law enforcement agencies. After the screenshot was disseminated in the community, it caused a lot of panic. To this end, Binance rarely issued two consecutive statements.

First statement on August 19th:

In response to many recent incidents of account blocking due to assistance in investigations, Binance Chinese Channel responded that: Binance will never do anything that harms the interests of users out of self-interest, especially the recent rumors that are speculative. Globally, when law enforcement agencies of various countries put forward reasonable requests for assistance in investigations, the platform party is obliged to provide necessary assistance. However, recent individual incidents have been purely maliciously distorted and interpreted. Users are requested to treat rumors rationally, and we will continue to pay attention.

A second statement on August 24 released more information:

In response to the recent reappearance of account closures, on August 24, Binance issued another statement stating that, as the world's largest exchange, protecting users has always been our highest principle. For accounts and funds involved in investigations, Binance has Responsibilities and Obligations To assist law enforcement agencies in their investigations, Binance also has strict internal standard operating procedures, which is the consistent attitude and practice of Binance globally. Regarding the recent rumors and remarks about the security of Binance in the community, please do not believe it. The user's funds in Binance are safe. If there is no further effective judgment from the law enforcement agency, the assets and accounts will be unlocked within a limited period of time (the period varies depending on the specific case). If you find that your account is under risk control, please contact customer service for assistance in time, and we will explain the situation to the user depending on the circumstances of the case. At the same time, users are reminded again, please be cautious about accepting assets of unknown origin through off-exchange transactions. Once illegal assets are involved, your account may be assisted in investigation and risk control. It is recommended that users make transactions (especially deposit transactions), please be sure to Choose regular platforms and merchants to avoid risks, and don't lose big because of small things.

Compared with the first time, the statement added an explanation of the suspension time and reasons: "If there is no further effective judgment from the law enforcement agency, the assets and accounts will be unlocked within a limited period of time (period varies depending on the specific case)"; And "Please be cautious about receiving assets of unknown origin through over-the-counter transactions. Once illegal assets are involved, your account may be assisted in investigation and risk control. It is recommended that users make transactions (especially deposit transactions), please be sure to choose a regular platform and Merchant".

Judging from the latter sentence, it seems to imply that in this incident, a user purchased the "black cryptocurrency/USDT" with fiat currency after trading off-exchange and transferred it to the Binance account. The police contacted Binance after tracing, and Binance assisted in blocking the account. In addition, the article emphasizes "especially deposit transactions", which is relatively rare. Because in the past, most of the problems were caused by withdrawals (cryptocurrency was exchanged for legal currency, and the bank card was frozen because the counterparty currency was black money). The emphasis on "deposit transaction" this time refers to the use of legal tender to purchase cryptocurrency. Cryptocurrency is black money, so the account is blocked, which also confirms the above hint.

Effective judgments by law enforcement agencies have also drawn attention. For example, another derivatives exchange stated that they need a written request from the court to suspend their accounts, which seems to intend to rob customers. But for Binance, due to its larger volume and more attention, I am afraid that compliance needs to be stricter; secondly, in China's legal system, or in the legal systems of different countries, it is not necessarily the case. Both require court papers to investigate. And in specific incidents, waiting for slower court filings could lead to another escape of hacker/criminal funds. However, if it fully cooperates like the withdrawal bank, it is unacceptable for users to freeze thousands of accounts at once like Dongguan. Therefore, it is extremely important to grasp and clarify the boundaries of exchanges in a timely manner.

In addition, the Binance government and law enforcement agency information inquiry assistance system has also attracted attention. In fact, this is not a system that was released recently. As early as March of this year, the press release stated that it "implemented a law enforcement request system that government and law enforcement agencies can use to submit information requests" and that the system should be live by 2021. The distance time of the transaction hash in the information submitted by the system is April 6, 2021, and the release time of the webpage plug-in judgment is June 23, 2021.

The system guidelines stated that Binance collects, uses and stores user information in accordance with the terms of use and privacy policy. User information includes information provided by users to open Binance accounts, user information collected by Binance to provide services, and other compliance information (e.g.: mandatory record keeping, anti-money laundering (AML), know-your-customer (KYC) obligations wait). In order to assist law enforcement officials of the government and law enforcement agencies in providing information on Binance users in ongoing criminal investigations, we will require you to provide valid court orders, investigation orders, execution orders or other judicial orders with legal jurisdiction. After receiving a judicial preservation order related to a criminal investigation, Binance will take appropriate measures to preserve relevant information and records for ninety (90) days. Law enforcement officials of government and law enforcement agencies must make additional requests through LERS for extended retention of information and records.