Adverts for Binance, which boasts of being the world’s largest exchange for cryptocurrency, are everywhere.
The company describes its service, allowing investors to buy bitcoin and all other kinds of digital currencies, as secure, fast and elegant. You can buy and sell in minutes.
It is not alone. The bitcoin bubble has led to a rash of cryptocurrency trading platforms springing up online. Their names are on the sides of buses, on advertising hoardings at sports events and on the shirts of Premier League football teams.
But concerns are growing that cryptocurrency trading sites allow fraudsters to set up an account in minutes without checks, leaving them free to hide money stolen through scams.
The fight against scammers has become a global battle waged by police, finance companies and governments. One key part is to intercept the proceeds of fraud as it flows through the system. Banks say that one of their biggest problems is chasing the money fast enough because fraudsters can spread it across dozens of accounts within minutes. These accounts, they claim, are normally run by unwitting customers, so-called money mules, who have been duped into letting criminals launder money through them.
Fraudsters who send fake Royal Mail, parcel delivery, HMRC, Covid test or bank text messages to victims to get them to share their bank details, or who post fake investment adverts to try to get victims to send money, are said to then transfer the proceeds of their crimes to cryptocurrency wallets that can be opened with few identity checks.
We wondered how easy it was to open a cryptocurrency trading account. Here’s what we found out.
How we did it
Getting an account could not be simpler. The “Register Now” button is the first thing you see when you visit the Binance website. After entering your email address and creating a password, you are asked for your personal details.
After completing my registration I then bought some bitcoin using a debit card that did not match the name I gave as the account holder. There were no obvious checks on my identity. I could easily move money from any source through the account, rendering it almost untraceable.
TSB is preparing to become the first big bank to ban its five million customers from buying cryptocurrency on trading sites such as Binance. Within weeks it will use computer technology to block such sales, Times Money has learnt. One in eight payments made to crypto trading platforms from TSB customers were made to fraudsters, compared with 1 in 5,500 for non-crypto transactions. TSB said two out of every three cryptocurrency frauds affecting its customers were linked to Binance.
Between March 15 and April 15, TSB said it reported 849 fraud cases to Binance but had no response. “Unfortunately, these trading websites can often fail to show the necessary level of care for the many victims who lose life-changing sums on their platforms,” said Ashley Hart, the head of fraud at TSB.
“This is a massive problem,” said Jerry Walters, who spent 30 years working in financial fraud and crime enforcement at Thames Valley and City of London police. “Some cryptocurrency companies appear to be doing little due diligence, then giving people access to trade on their platforms. My advice would be to steer clear of the whole industry, full stop.”
Investigators believe that new digital banks and trading platforms do not take enough care in allowing customers to open accounts. Under “Know Your Customer” rules concerning money laundering, financial institutions must take steps to verify the names of individual and business customers and check the source of their funds.
The Financial Conduct Authority, the City regulator, says that companies must have “policies and procedures in relation to customer due diligence and monitoring”.
Banks typically use passports, driver’s licences, statements or bills from utility companies to verify identities. But cryptocurrency firms are unregulated and many are registered overseas. Last year the FCA demanded that all cryptocurrency trading sites doing business in the UK should apply for temporary registration to comply with rules on money laundering and the financing of terrorism.
After it warned that a significant number of firms did not comply with money laundering regulations many withdrew their applications. It is not known if those companies stopped trading.
The FCA said: “Crypto-assets are considered very high-risk, speculative investments. If consumers invest in crypto-assets, they should be prepared to lose all their money.”
Recent falls in the value of bitcoin have not stopped people investing. Even though it is down 39 per cent since mid-April, the price is still up about 300 per cent since January last year.
AJ Bell, an investment company, said that about 7 per cent of adults in Britain have bought cryptocurrencies in the past 12 months — about 3.64 million people — compared with 5 per cent who invested in stocks and shares Isas. UK Finance, the banking industry’s representative body, reported that £135.1 million was lost to investment scams last year, a 42 per cent rise on 2019. Most victims were in their twenties and thirties.
Binance said: “Binance is very serious about its responsibility to protect users from attempted scams and frauds. We have an excellent record of working with law enforcement agencies.”
Referring to my purchase of bitcoin, a spokesman said: “That should not have happened. It’s definitely impossible for that to have happened, well almost impossible, and if you look at the account now you’ll find you can’t buy any more.”
I looked. My account was still active.
First Published in Times