Binance’s Handling of Illicit Activity: A Closer Look

Recent Developments

In the world of cryptocurrency, few names loom larger than Binance, the largest cryptocurrency exchange. Following a revealing investigation by the International Consortium of Investigative Journalists (ICIJ), it has come to light that hundreds of millions of dollars in suspicious cryptocurrency transactions had landed in Binance accounts. While the exchange claimed that illicit activity had dramatically decreased since the start of 2023, leading analytics firm Chainalysis has raised questions about the accuracy of these claims.

The ICIJ Investigation: A Deep Dive

ICIJ, in collaboration with 37 media partners, published an extensive investigation titled The Coin Laundry focusing on money laundering through the cryptocurrency industry. This investigation scrutinized Binance’s operations during a period when the exchange was under U.S. court-mandated monitoring for its anti-money laundering (AML) practices.

On November 17, the same day the ICIJ report was released, Binance countered with its findings. The exchange highlighted a staggering two-year decline in illicit funds on its platform, backed by data from prominent analytics firms, including Chainalysis. However, Chainalysis voiced concerns about this report, stating that Binance had not accounted for critical categories of crime, notably funds obtained through hacks.

Omitted Crime Data: Chainalysis’ Response

In a public statement on its website, Chainalysis clarified that it had not conducted the analysis cited by Binance. The omission of data related to hacks and other forms of illicit activity raised eyebrows, adding layers to the ongoing scrutiny of Binance’s compliance efforts.

Chainalysis pointed out that the data Binance utilized in its analysis “does not appear to include all categories of illicit activity that Chainalysis tracks.” This discrepancy raises questions about the accuracy and completeness of Binance’s claims regarding its handling of illicit funds.

Binance’s Past and Present

Historically, Binance has faced serious allegations concerning its facilitation of money laundering. In 2023, the exchange pleaded guilty to violating U.S. money laundering laws. Following this, the ICIJ investigation discovered that Binance accounts received over $400 million from the Huione Group, a Cambodian firm flagged by the U.S. Treasury for extensive money laundering activities. Furthermore, nearly $900 million was funneled into Binance from a platform associated with North Korean hackers.

In response to the ICIJ findings, Binance maintained that its financial crime metrics, as presented in its various publications, are accurate. The firm emphasized that its analysis was conducted independently and acknowledged the limitations of the data, explaining that certain categories, like ransomware and hacks, necessitate distinct methodologies and definitions.

Commitment to Improvement: Binance’s Stance

Despite the controversy surrounding its figures, Binance expressed openness to forming collaborations with analytics firms to broaden its future analyses. The exchange noted its willingness to incorporate additional categories of illicit activity to create a more comprehensive overview.

Binance has made significant investments in compliance measures, staffing, and advanced tools to enhance its monitoring capabilities. The company claimed that, in June 2025, only 0.007 percent of its transaction volume was linked to wallets tied to illicit activities. Additionally, it asserted that, according to their interpretation of Chainalysis data, it had reduced its direct exposure to illicit flows by at least 96 percent since early 2023.

Analysis and Methodology: The Role of Chainalysis

Chainalysis, alongside other analytics firms, plays an essential role in scrutinizing cryptocurrency transactions. They provide valuable insights into blockchain data, helping exchanges like Binance identify ownership of cryptocurrency wallet addresses—akin to banking details. This information is vital for compliance departments in detecting suspicious funds.

Interestingly, Chainalysis and TRM Labs, another prominent analytics firm, have differing perspectives on Binance’s claims of having the lowest exposure to criminal funds among competitors. TRM Labs denied that their analysis included comparisons to other exchanges, a statement supported by Chainalysis.

The Dynamics of Data in Crypto Compliance

Blockchain analysis firms find themselves navigating a complicated landscape. They serve as both watchdogs and boosters within the cryptocurrency industry. While regulators and law enforcement agencies rely on these firms for accurate, real-time data about criminal activity, these analytics companies also maintain partnerships with crypto ventures that have faced scrutiny for enabling large-scale crime.

Notably, tensions can arise when these firms are implicated in the exchanges they analyze. This relationship was highlighted recently in another ICIJ story focusing on Tether, where questions about the firm’s connections to illicit wallets were posed. Both Chainalysis and TRM maintained confidence in their findings regarding these wallet addresses.

By mapping the evolution of illicit activity associated with cryptocurrency exchanges, it’s clear that understanding the complex interplay between compliance measures, emerging data, and evolving criminal methodologies will be paramount as the industry continues to grow and mature.