Consumer complaint received 2023-03-06
Product: Money transfer, virtual currency, or money service — Virtual currency
Issue: Fraud or scam — 
Company: BAM Management US Holdings Inc. (TX)

XX/XX/XXXXXXXX  To : The Consumer Financial Protection Bureau ( CFPB ) XXXX XXXX XXXX XXXX  DC XXXX, USA Subject : XXXX Fraud Claim Binance AML / CTF Dear Sir / Madam , I would like to draw your attention to XXXX XXXX - I had sent my complaint letter to Binance , in which I clearly stated how this scam has affected me personally, psychologically and financially. 
I am afraid I have had to go through so much " bureaucracy '' thus far in order to catch their attention to my concerns. This really doesn't show their complaints department in a good light, to say the least ; and certainly, does not contribute to my overall satisfaction and peace of mind. 
My complaint is against the bank that did not do its job properly ( could not prevent/foreseen fraud and could not conduct a proper investigation ) and not against the vulnerable customer who fell victim and lost all the savings due to the misconduct of the bank. 
I feel very distressed and cheated, all because no one took action immediately and practice their duty of care, therefore I only request what I believe to be rightfully mine, as all institutions were more than negligent in protecting my account and handling the complaints. I comprehensively provided explanations and proof to my claim, even so, Binance never acknowledge my complaint, therefore, I have approached you CFPB and I would like to receive your assistance on this matter. 
Overview : It is well established that victims with some characteristics of vulnerability may be more likely to fall victim to scams, including misleading online financial advertisement. They may be specifically targeted through unsolicited approaches, more trusting or more likely to be persuaded to disclose personal financial details. 
It is evidently proven that scam victims have relatively little freedom of reactivity, they respond immediately, instinctively, and invariably to the specific demands of the perpetrator under psychologically pressurising circumstances that the perpetrators themselves created to manipulate said victims ( myself in this instance ). Being able to consciously refrain from reacting in accordance with the scammers instructions is extremely difficult and sometimes impossible once theyve got a hold of your funds. 
Likewise, financial institutions should consider their role in society and the responsibility that falls upon them to ensure the integrity of the financial markets, both when sending and receiving money. 
Firms have an obligation under the Anti-Money Laundering Regulations to take appropriate measures to ensure that their employees and agents are made aware of the law relating to money laundering, and terrorist financing ( and to data protection ), and are regularly given training in how to recognise and deal with transactions and other activities which may be related to money laundering or terrorist financing. 
General Obligation : Around XX/XX/XXXX, I fell victim to two multi-layered scam operations run by XXXX which involved me making deposits for a total amount of XXXX BTC from my XXXX  account to Binance at the instructions of the scammers. 
In providing its services, financial institutions as registered and licensed Payment Service Providers, are required by law to exercise the care and skill of a diligent, prudent banker. In this case, this means that the payment service provider should not turn a blind eye to known facts pointing to a real possibility that their customer is scammer or is involved in potentially fraudulent activity. 
FATF issued International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation ( the FATF Recommendations ), aimed at setting minimum standards for action in different countries, to ensure that AML/CTF efforts are consistent internationally. 
There is a long-standing obligation upon financial institutions to have necessary procedures in place to ensure the detection and prevention of money-laundering, terrorist funding and other illegal activities. 
In this case, it is perfectly obvious that Binance could have, and should have, utilised various risk-based examination procedures and techniques, all of which are within their purview and legal obligation, and could have entirely prevented this disastrous outcome. 
Given that their client owner of wallet XXXX was an active participant in the movement of my money, which eventually ended up with the Company, Binance have not exercised their duties to identify this suspicions scheme in a timely manner. 
Applicable Anti-Money Laundering ( AML ) regulations at the time of the transactions : 3 Anti-Money Laundering Requirements for Financial Institutions and Other Designated Businesses 3.1 What financial institutions and other businesses are subject to anti-money laundering requirements? Describe which professional activities are subject to such requirements and the obligations of the financial institutions and other businesses. The following are subject to the requirement to maintain risk based AML Programs : Banks, including savings associations, trust companies, credit unions, branches and subsidiaries of foreign banks in the United States, and Edge corporations. 
Broker-dealers in securities. 
Mutual funds. 
Futures Commission Merchants and Introducing Brokers in Commodities. 
Money Services Businesses 3.4 What are the requirements for recordkeeping or reporting large currency transactions? When must reports be filed and at what thresholds? 
Currency Transaction Reporting Financial institutions ( defined as financial institutions under the BSA regulations ) must file CTRs with FinCEN on all transactions in ( physical ) currency in excess of {$10000.00} ( or the foreign equivalent ) conducted by, through, or to the financial institution, by or on behalf of the same person, on the same day. 31C.F.R. 1010.310315. 
It is prohibited to structure transactions to cause a financial institution not to file a CTR or to file an inaccurate CTR by breaking down transactions into smaller amounts at one or more financial institutions over one or more days. 31 C.F.R. 1010.314. 
Customer Due Diligence Pursuant to regulatory requirements, which became effective XX/XX/XXXX, as part of their AML Programmes, certain financial institutions ( banks, broker-dealers, mutual funds, FCMs and IBCs ) must implement formal risk-based XXXX  programs that include certain minimum elements, including customer identification and verification ( under a Customer Identification Program ), obtaining information about the nature and purpose of a customers account, ongoing monitoring of customer accounts, obtaining beneficial ownership information at a 25 % threshold for legal entity customers and identifying a control person for legal entity customers ( with certain exceptions ).

There also is a specific BSA requirement to maintain CDD programs for non-U.S. persons private banking accounts and foreign correspondent accounts. The same covered financial institutions as for CDD programs ( banks, broker-dealers, mutual funds, FCMs and IB-Cs ) must maintain a CDD program for non-U.S. private banking accounts established on behalf of, or for the benefit of, a non-U.S. person and foreign correspondent customers and an enhanced due diligence ( EDD ) program for those relationships posing a higher risk. These programs must be designed to detect and report suspicious activity with certain minimum standards. These requirements are based on Section 312 of the PATRIOT Act and are often referred to as Section 312 requirements. 
31 C.F.R. 1010.610 ( due diligence for foreign correspondent accounts ), 1010.620 ( due diligence for private banking for non-U.S. persons ).

3.9 What is the criteria for reporting suspicious activity? 
Financial institutions and other businesses subject to the AML Program requirement ( except Check Cashers, Operators of Credit Card Systems, and Dealers in Precious Metals, Precious Stones, or Jewels ) are required to file SARs with FinCEN under the BSA ( and for banks, under parallel requirements of their federal functional regulators ). SARs are required where the filer knows, suspects, or has reason to suspect a transaction conducted or attempted by, at or through the financial institution : ( 1 ) involves money laundering ; ( 2 ) is designed to evade any BSA regulation or requirement ; ( 3 ) has no business or apparent lawful purpose or is not the sort in which a particular customer would engage; or ( 4 ) involves the use of the financial institution to facilitate criminal activity or involves any known or suspected violation of federal criminal law.

See, e.g., 31 C.F.R. 1023.320 ( c ) ( SAR requirements for broker-dealers ). Generally, the reporting threshold is {$5000.00} or more. For banks, if the suspect is unknown, it is {$25000.00} or more. 
For MSBs, generally, it is {$2000.00} or more. 
Conclusion Obviously, Binance attempt to avoid the inevitable, hard-to-swallow conclusion that they are liable to me in this instance by holding that the general duty of care at stake is not, and therefore should not be, extended to the circumstances described herein ; this sort of reductionist view has long been exposed as inadequate among key financial regulators worldwide. 
It is increasingly imperative that deposit-takers run thorough background checks to detect highrisk transactions and continuously ensure that no payment is aiding money laundering activities and/or fraud. 
By adequately assessing systemic risks and appropriately responding to them, market integrity is enhanced, the financial infrastructure is strengthened, and fraud is significantly minimized.