On joining Binance in the middle of the storm

 When Noah Perlman joined Binance in January 2023, the company had been navigating turbulent waters. This period saw Binance facing significant scrutiny, eventually culminating in resolutions with several U.S. agencies that marked the company turning the page on its historical issues and going through leadership change in November 2023.  Despite the storm, Noah saw an opportunity for a career capstone, a chance to shape the compliance culture at the world's largest crypto exchange, and by extension - contribute to setting the standard for the entire crypto space.

 Previously he worked for the cryptocurrency exchange Gemini as the Chief Compliance Officer and then as the Chief Operating Officer. Prior to crypto, Noah had built a compliance-related career spanning decades in leadership positions across big law, United States' Drug Enforcement Administration (DEA), and banking giant Morgan Stanley.

 "I had a great time in Gemini with the Winklevoss twins, but at that time I had reached a crossroad in my journey with Gemini and was in the middle of discussing what was going to happen next when Binance came knocking at the door," Noah recounted. Noah spent a lot of time with CZ, Yi He, and other Binance leaders to understand that they had been committed to getting the culture of compliance right and that Binance saw this as a special responsibility they had as the largest digital-asset exchange in the world. He realized they wanted to set the standard of what crypto compliance would look like in the decade ahead.

 "That was obviously a decision not made lightly. And one of the key things when coming into a place like Binance is it's just critical that you get sort of all the information and transparency. I sat with the management to understand, 'Okay, what are you facing? What are the issues? What is the commitment to getting it right?'"

 On Binance's evolution in compliance understanding and enforcement

 Binance was started by tech enthusiasts and traders, and its early years were marked by a hardcore focus on users, technology, and trading, sometimes at the expense of strict compliance. This focus led to some misguided decisions early on, which the company has spent the past three years rectifying. The realization of the importance of compliance has driven Binance to ramp up its efforts in this domain significantly, investing heavily in its compliance program and dedicating resources to meeting regulatory standards. World-class industry experts such as Tigran Gambaryan, Nils Anderson-Röed, and Noah himself joined during this period. Perlman noted that most of the work to transform Binance's compliance had been done before he came along.

 The settlement, Noah continued, has been the culmination of what Binance calls "turning the page" internally: making sure that the entire organization is fully compliant - not just with the actual letter of the law, but the spirit as well.  "We think we can do that in a way that is consistent with our mission of being user focused. And that's the challenge and the opportunity. That is one of the things that drew me to it. What the settlement has done has sort of crystallized both the challenge and the opportunity to get this right."

 It is a challenge because Binance is really doing three things at once: first, remediating past issues, second, running a business-as-usual compliance program as the biggest exchange in the world with over 200 million users, and third, improving this program on the go.

 It is also challenging to do so across a large number of countries, all with very different markets and regulatory frameworks. This means that Binance has to keep adaptive and flexible with their services and offerings, tailoring the platform within the legal limits of different jurisdictions.

 On building a strong compliance program and setting an industry standard

 According to Noah, the key elements of building a strong compliance program can be divided into two buckets: technology and resources in one bucket, and culture in another.

 Binance, Noah observed, needs to have strong technological defenses: in-depth transaction monitoring, security infrastructure, risk management mechanisms, and robust operational framework. "We need to ask these questions: is our transaction monitoring program fit to our purpose? Do we tune it appropriately? Is its noise-to-signal ratio right? How about our model validation? And all the other tidbits. This gets increasingly harder to do at scale across different jurisdictions, different regulatory regimes. It is extremely challenging to get it right from KYC to screening, on-chain or off-chain. We have to be hyper focused now, and given our past, we might not get the benefit of the doubt."

 In Noah's opinion, today Binance has one of the best-in-class compliance programs with stringent disclosure requirements and reporting procedures in place. However, this program is still far from perfect, and no Chief Compliance Officer would ever tell you that their program is perfect and tamper-proof.

 "After all, we can't eradicate fraud, we can only mitigate fraud, and as such, we can only strive for continuous improvement."

 On Binance's culture of compliance

 The second bucket is culture. Noah shared that building the culture of compliance for Binance is perhaps the hardest challenge for him to tackle. "How do we measure culture of compliance, how do we make sure that the company is following through with compliance at all levels of operations?"

 Having a culture of compliance means a strong commitment across the board to prioritize compliance in every step. Perlman said that at Binance, compliance now has a major seat at the table. For instance, Noah himself reports directly to the CEO and speaks at every company's town hall, which underscores the importance of his role in the company's operations.

 What does the future of Binance compliance program look like? A great compliance program should be invisible to the users, and that's what Noah and Binance strive to achieve.

 Perlman underscored the puzzling contradiction between the libertarian ethos that permeates the cryptocurrency community and the increasing need for cooperating with law enforcement agencies globally.

 "I understand the importance of privacy and libertarian nature, but nobody wants to be ripped off. I think most people don't want to unknowingly be funding illicit activity and actions and things like that. So there's a balance. But cooperation with law enforcement, again, under proper court procedure, it protects privacy, and that's important."

 Creating a culture of compliance at Binance involves balancing the libertarian ethos of the crypto industry with the necessity of working with regulators. Binance is committed to always acting within the law to its best ability and knowledge, but still protecting users' freedom and privacy. After all, one major revolutionary promise of cryptocurrency is that it provides a solution where privacy and freedom can't be taken for granted.

 Binance has made significant strides in assisting law enforcement, handling nearly 174,000 requests for cooperation and conducting hundreds of law enforcement training sessions. These efforts attest to Binance's proactive stance in combating illicit activity within the crypto space, demonstrating a commitment to regulatory compliance and user protection.