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Thursday, May 30, 2024

How Binance contributed to crypto crime’s downward trend

In 2023, there was a marked drop in crypto crime, with less value being received by illicit crypto addresses and a shrinking share of illicit transactions. This was driven by increased industry-wide security and compliance efforts and better collaboration with law enforcement partners.

Here’s how: As the largest digital-asset ecosystem and leader in the space, Binance’s efforts were instrumental in reducing crypto-related crime on the scale of the entire ecosystem, demonstrating its commitment to setting industry standards in tackling cybercrime.

  • Binance invested heavily in enhancing its compliance program and expanded its collaboration with law enforcement in 2021, demonstrating significant progress and growth in various areas of compliance work.

1. Crypto crime in decline 

The recently unveiled 2024 Crypto Crime Report by blockchain data firm Chainalysis summarises 2023 trends and improves the accuracy of previous estimates in light of the updated data.

  • The findings suggest a significant reduction in some of the key crypto crime metrics from 2022 to 2023. The total value received by illicit crypto addresses and the share of illicit transactions in the overall flow of crypto transaction activity both went down markedly.
  • The decline in illicit volumes and transaction share is the result of the crypto industry as a whole stepping up its collaborative security efforts, perfecting its defences, and tightening its collaboration with law enforcement agencies.
  • It is also likely that the average crypto user has also become more vigilant and aware of dangers like scams and fraud.

Key numbers: According to Chainalysis’ 2023 report, arguably the most illustrative of crypto-related crime metrics, the share of illicit transactions in the overall crypto transaction volume, went down from 0.42% to 0.34%.

  • These include assets stolen in crypto hacks as well as funds sent to wallets that Chainalysis analysts designated as illicit,  those associated with ransomware groups, fraud shops, darknet markets, and online drug sellers; addresses linked to terrorism financing and sanctioned entities and jurisdictions, and other relevant categories.

What this means: Chainalysis’ estimate that only a fraction of a per cent of all crypto transactions was linked to criminal activity or sanctioned entities demonstrates that in 2023, the digital-asset space has been an extremely unwelcoming place for bad actors, and even more so than in 2022.

  • This stands in stark contrast with false beliefs about crypto being a place of rampant lawlessness that some people still hold and promote.

Another key metric describing the scale of crypto-related crime over a given period, the total value of digital assets received by illicit addresses, also showed a considerable decline between 2022 and 2023, dropping from $39.6 billion to $24.2 billion.

2. Binance: All in on collaborative security 

Binance’s status as a responsible leader in the digital asset space means that it must set industry standards in security and compliance, thus helping the entire ecosystem preserve its integrity and fortify its defences against bad actors.

In 2023, Binance increased its collaborative efforts to combat crime, approaching ecosystem security as a responsibility shared between industry players, users, regulators, and law enforcement.

  • In the past year, Binance’s specialised teams responded to over 58,000 law enforcement requests and conducted 120 workshops and training sessions with crime fighters globally (up from 70 in 2022), providing essential intelligence, know-how and skills that underpinned the success of major investigations and enforcement actions.

Some examples: Binance’s collaboration with the National Bank of Tajikistan and blockchain analytics firm TRM Labs, which led to the arrest of several key members of the terrorist group Islamic State – Khorasan Province (ISKP). Binance also assisted the Royal Thai Police in dismantling international criminal networks responsible for multi-million-dollar scams targeting thousands of victims.

3. Quantitative and qualitative improvement 

The biggest update: Between 2022 and 2023, the amount Binance committed to its compliance program went up from $158 million to $213 million, marking a 35% increase.

  • The company invests in world-class talent, building or acquiring industry-leading technology, and putting in place efficient policies and processes.

Here’s what else: Binance is constantly monitoring transaction flows on and off its platform using a combination of automated and manual approaches.

In 2023, Binance significantly improved its transaction monitoring capabilities. Binance’s on-chain monitoring team processed 677,772 on-chain alerts.

  • Thanks to the implementation of a new automation tool, Binance achieved a 150% increase in the productivity of on-chain transaction monitoring, meaning more potential threats were analysed and addressed for the same amount of resources allocated.

Binance does not solely analyze blockchain exposure; its enhanced purpose-built tools also monitor for suspicious transactions conducted internally.

  • In 2023, Binance’s analysts reviewed and closed 2,648,318 off-chain alerts. As a result of implementing new tools, both in-house and external, the company increased the productivity of these efforts by an estimated 40% compared to last year.

A suspicious activity report (SAR) is a basic unit of analysis when investigating transactions that, for any reason, give rise to a suspicion that illicit activity may be taking place.

  • In 2023, Binance’s SAR team completed 51,627 such reports, recording an increase of 157% in total cases and improving productivity by 180%.

On the market surveillance front, the team tasked with monitoring trading activity on Binance and ensuring the integrity of its markets introduced a new third-party monitoring solution and reached the rate of investigating an average of 20,000 alerts per month.

The impact: All these improvements mean that Binance’s ability to detect and tackle illicit activity that takes place within its ecosystem — or even touches it tangentially, like when criminals attempt to move ill-gotten funds through it — has grown stronger, making it even more difficult for bad guys to achieve their goals.

Looking ahead: With 2024 set to mark a fundamental turn in the crypto industry toward even more stringent and mature compliance practices and habits, Binance will remain steadfast in its commitment to offering a safer crypto environment for all users.

  • Binance will further ramp up its efforts to combat illegal activity and continue to invest in refining its compliance and monitoring initiatives, employing cutting-edge technology and best-in-class talent.

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