Reporting User Info Could Trigger Criminal Investigations and Civil Audits

Binance, the world’s largest cryptocurrency exchange, is now requiring users to verify their identity as enhanced security protection, but this requirement will have huge crypto tax compliance ramifications for its millions of users.

By requiring Anti-Money Laundering (AML) and Know Your Customer (KYC) verification, including users uploading government IDs in order to access its products and services, Binance is signaling all user activity will be reported to the IRS, according to crypto tax attorney Alex Kugelman.

“The requirement of AML/KYC verification basically means user information can and will be provided to U.S. authorities,” Alex said. “Binance is reporting all of this information to the government, so if you are a Binance user then you must report your activity to remain in tax compliance and avoid potential audits.”

AML is tightly linked to KYC requirements. AML, which is required for all financial institutions and businesses subject to Bank Secrecy Act regulations, broadly represents laws, regulations, and policies designed to prevent illegal money-making activities or moving illicit funds. KYC policies involve verifying customers’ identities and income sources while also monitoring their activity on a recurring basis.

Binance said these additional AML/KYC security measures “will further enhance user protection and combat financial crime.” 

Binance’s reporting of user information and activity to the IRS could trigger criminal investigations and civil audits.

“The biggest implication is that Binance will be providing trading data and wallet information that is connected to U.S. taxpayer information,” Alex said.

For missing records, accounting, or crypto tax return preparation, Kugelman Law’s crypto tax CPAs use proprietary, cutting edge software to recreate activity. The improved documentation helps resolve current questions, prepare for future ones, and has helped make us a standout firm in cryptocurrency audits.

If you are a Binance user, then you should contact Kugelman Law crypto tax attorneys and accountants today to ensure your records are up to date and you are providing timely and accurate information to the IRS.