Binance AML Compliance: CZ Defends $1B Iran-Linked Transaction Screening

Global, February 14, 2026: Binance, the world’s largest cryptocurrency exchange, faces renewed regulatory scrutiny following a Fortune report alleging over $1 billion in crypto transactions potentially reached Iran-linked entities. Former CEO Changpeng “CZ” Zhao has issued a firm public response, asserting that all trades on the platform historically ran through third-party anti-money laundering (AML) tools. This defense emerges as the exchange navigates the complex aftermath of its 2023 settlement with U.S. authorities, highlighting the persistent challenges of global sanctions enforcement in the decentralized finance landscape.

Binance AML Compliance Under Microscope After Fortune Report

The allegations, published by Fortune on February 13, 2026, represent one of the most significant compliance challenges for Binance since its landmark $4.3 billion settlement with the U.S. Department of Justice in late 2023. According to the report, investigative analysis suggests that between 2018 and 2022, substantial cryptocurrency volumes moved between Binance users and entities with potential links to Iran, a nation subject to comprehensive U.S. and international economic sanctions. The report’s timing is particularly sensitive, coming just over two years after Binance implemented what it described as a “fundamental overhaul” of its compliance programs.

Changpeng Zhao, who stepped down as CEO as part of the 2023 settlement but remains a significant shareholder and public figure, responded directly to the allegations. In a statement, CZ emphasized the technical infrastructure behind Binance’s compliance efforts. “Every single trade that ever occurred on Binance was screened by third-party AML and sanctions tools,” Zhao stated. He framed the report as potentially misunderstanding the limitations of blockchain analytics, noting that while transactions are public, attributing real-world identity and intent to blockchain addresses involves complex, often imperfect, analysis.

Third-Party AML Tools and Their Role in Crypto Compliance

The heart of CZ’s defense rests on the deployment of external compliance software. Major cryptocurrency exchanges like Binance typically integrate services from specialized firms such as Chainalysis, Elliptic, or TRM Labs. These tools screen transactions against known blacklists of wallet addresses associated with sanctioned entities, terrorist financing, or other illicit activities. The process is largely automated, flagging transactions for manual review when they hit on specific risk parameters.

However, compliance experts note several inherent challenges:

• Data Latency: Sanctions lists and threat intelligence are updated continuously, but there is always a gap between a designation and its propagation through all screening systems.
• Obfuscation Techniques: Bad actors use mixers, cross-chain bridges, and complex transaction chains to obscure the origin and destination of funds.
• Jurisdictional Complexity: A user in a non-sanctioned country may legally send funds to another user in a non-sanctioned country, even if the ultimate beneficiary resides in a sanctioned jurisdiction—a process known as “layering.”

A 2025 study by the Carnegie Endowment for International Peace concluded that while AML tools have improved dramatically, they remain a “detergent, not an absolute barrier” against sophisticated sanctions evasion.

The Historical Context of Binance’s Compliance Journey

To understand the current allegations, one must examine Binance’s regulatory history. Founded in 2017, the exchange grew at a phenomenal pace, often prioritizing user acquisition and market share over established compliance frameworks—a common trait among early crypto platforms. U.S. regulators, including the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), began scrutinizing the platform around 2020, concerned about its lack of a clear corporate structure and insufficient customer due diligence.

The November 2023 settlement was a watershed moment. Binance admitted to violations of the Bank Secrecy Act and failing to register as a money services business. As part of the agreement, the company paid a historic fine, CZ pleaded guilty to charges and stepped down, and Binance committed to a multi-year monitorship by an independent compliance firm. The company’s new CEO, Richard Teng, a former regulator from Abu Dhabi, was tasked with leading a “culture of compliance.” The recent Fortune report tests the durability of that cultural shift and the effectiveness of the technical controls implemented since 2023.

Implications for Global Crypto Regulation and Sanctions Enforcement

The allegations, regardless of their ultimate veracity, have immediate consequences for the broader cryptocurrency industry. Regulatory bodies worldwide are crafting frameworks for digital assets, and high-profile cases directly influence policy. The U.S. Treasury Department has repeatedly warned that digital assets pose a unique challenge to sanctions regimes, citing their borderless nature and potential for pseudo-anonymity.

This incident reinforces several key points for regulators and exchanges alike:

• The Need for Travel Rule Adoption: The Financial Action Task Force’s (FATF) Travel Rule (Recommendation 16), which requires VASPs to share sender and beneficiary information for transactions above a certain threshold, remains inconsistently implemented globally.
• Pressure on Off-Chain Surveillance: There is growing regulatory expectation for exchanges to conduct deeper, off-chain investigations into customer activity, moving beyond simple automated address screening.
• Liability for Third-Party Tools: The case raises the question of ultimate responsibility. If an exchange relies on a third-party AML provider that misses a flag, is the exchange still liable? Legal precedent suggests the answer is yes.

The situation also places other global exchanges on alert, prompting likely internal reviews of their own historical transaction data and screening protocols.

Analyzing the Technical and Investigative Claims

Fortune’s report is based on blockchain forensic analysis. This methodology involves tracing funds across public ledgers and clustering addresses believed to be controlled by the same entity. Investigators then attempt to link these clusters to real-world identities through data leaks, know-your-customer (KYC) information, or on-chain behavioral patterns. Linking clusters to a specific sanctioned nation like Iran is particularly challenging, as VPNs, proxy servers, and falsified documents can mask a user’s true location.

CZ’s rebuttal likely hinges on this complexity. His statement implies that the transactions in question, even if they terminated at wallets eventually linked to Iran, may have passed through the sanctioned screening filters at the time because the destination addresses were not yet flagged in the third-party systems Binance employed. This creates a central dispute of facts: were the tools deficient, were the sanctions lists incomplete, or did the transactions employ evasion techniques that fooled the systems? Answering this requires a forensic audit of Binance’s historical screening logs—data that may now be under review by its court-appointed monitor.

Conclusion

The allegations of $1 billion in potential Iran-linked flows through Binance represent a critical stress test for the cryptocurrency industry’s post-2023 compliance paradigm. Changpeng Zhao’s defense, centering on the use of third-party Binance AML tools, underscores the industry’s reliance on technological solutions to meet legal obligations. However, this incident vividly illustrates that technology alone is insufficient without robust governance, continuous oversight, and a proactive compliance culture. As regulators worldwide sharpen their focus, the outcome of this scrutiny will not only affect Binance’s future but will also set a precedent for how global sanctions are enforced in the digital age, defining the responsibilities of all major cryptocurrency exchanges moving forward.

FAQs

Q1: What exactly did the Fortune report allege about Binance?
The Fortune report, published February 13, 2026, alleged that forensic blockchain analysis identified over $1 billion in cryptocurrency transactions between Binance users and wallets potentially linked to entities in Iran, a country under extensive international sanctions, between 2018 and 2022.

Q2: How did former CEO CZ respond to the allegations?
Changpeng “CZ” Zhao issued a statement asserting that every trade executed on the Binance platform was screened by third-party anti-money laundering (AML) and sanctions compliance tools. He suggested the report may misinterpret the limitations of blockchain analytics and the continuous evolution of sanctions lists.

Q3: What are third-party AML tools, and how do they work?
Third-party AML tools are software services from companies like Chainalysis or Elliptic. They screen cryptocurrency transactions in real-time against constantly updated databases of wallet addresses associated with sanctioned entities, criminal activity, or terrorist financing, flagging suspicious transactions for review.

Q4: Why is this report significant given Binance’s 2023 settlement?
The 2023 $4.3 billion settlement required Binance to overhaul its compliance programs under a monitorship. This new report tests the effectiveness and durability of those reforms and examines whether historical compliance issues extended further than previously acknowledged.

Q5: What are the broader implications for the cryptocurrency industry?
This case increases regulatory pressure globally for stricter adoption of rules like the FATF Travel Rule, emphasizes the need for exchanges to conduct deeper due diligence beyond automated screening, and highlights the legal liability exchanges bear even when using external compliance providers.

Related News

• Top 3 Projects Leading Web3 Innovation in 2025 – WonderChain · io.net · World
• Binance Airdrop Unleashes $40 Million WLFI Windfall for Loyal USD1 Holders
• Méliuz Plans Massive $26.5M Bitcoin Purchase Boost

Related: On-Chain AI Economy: Pundi AI and MWX Forge Landmark Alliance to Integrate 400 Million SMEs

Related: HPX AetheriumX Partnership: Revolutionary Cross-Chain DeFi and GameFi Access

Related: Groundbreaking: China's Blockchain System to Certify Green Electricity and Track Emissions