Checkout.com Drops Binance Over Money Laundering, Compliance Concerns

Binance, led by Changpeng "CZ" Zhao, pictured, was once Checkout.com's largest customer.

Checkout.com, the London-based credit card processing company that ballooned its business model by servicing billions in crypto transactions for Binance clients, cut short its contract with the crypto giant this week, Forbes has learned.

In a pair of letters sent to Binance on August 9 and 11, Checkout CEO Guillaume Pousaz terminated the company’s relationship with its once-largest customer citing “reports of regulators actions and orders in relevant jurisdictions” and “inquiries from partners.” The second letter, seen by Forbes and sent two days after the first, cited additional concerns over Binance’s anti-money laundering, sanctions and compliance controls, and said the termination would be effective August 17. Checkout spokesperson Lewis Jones confirmed to Forbes the company had ended its contract with Binance.

In response, Binance told Forbes it disagreed with Checkout’s basis for terminating the contract, and said it was considering legal action. “We have come a long way to building an industry-leading compliance program and we hope to build more trust with regulators and partners,” spokesperson Dewi Mustajab said in a statement. She added that Checkout’s withdrawal would have “no impact on our services.”

Checkout.com’s abrupt uncoupling from Binance follows the crypto exchange’s decision earlier this week to scrap Binance Connect, its buy-and-sell crypto arm that helped businesses accept crypto payments. The service had been supported by Checkout, a person familiar with the arrangement told Forbes. Binance’s Mustajab said the service only “had a small number of users and transactions.”

Checkout, which in recent months has been processing between $300 million and $400 million in Binance transactions, according to a person in position to know, is the latest payment provider to drop the crypto giant as it faces a phalanx of investigations in several countries. (Checkout said the transaction figures are “inflated and inaccurate.”) Two U.S. agencies have charged the company with fraud and money laundering charges, and it has been forced to leave other jurisdictions. European payments provider PaySafe stopped working with Binance in June.

Checkout’s decision to terminate its contract with Binance is a stunning blow to the crypto exchange, especially given the role Binance played in making the London-based payments company one of Europe’s most valuable. The crypto exchange was once Checkout’s largest customer, processing approximately $2 billion in Binance transactions during a single month in 2021, according to a person with direct knowledge. That kind of business spiked the payment company's revenue ahead of a mammoth $1 billion funding round last year, which valued it at $40 billion, and made founder and CEO Guillaume Pousaz one of Europe’s richest men.

The alliance was a boon for both companies. In March 2020, Binance was struggling for crypto legitimacy in a market dominated by major financial institutions, and Checkout.com was trying to shed its reputation for processing payments to porn and gambling sites. Their partnership changed that while giving Binance a much-needed payments processor and Checkout.com massive transaction volume.

But when Binance launched Checkout.com’s platform in the first half of 2020 it did so without implementing 3D-Secure, a security feature designed to mitigate risk of money laundering and fraud and ensure Checkout’s clients complied with the European Union's Payment Services Directive, regulatory standards intended to secure payment transactions and protect consumer data associated with them. Binance executives insisted on disabling 3D-Secure in service of boosting trading volumes and reducing barriers for customers to transfer funds, three people familiar with the decision told Forbes.

Shortly after the launch, Visa alerted Checkout.com to a flood of fraudulent transactions on Binance — approximately $10 million, according to two people familiar with the incident. (Checkout said this figure is “inflated and inaccurate.”) Binance's refusal to deploy Checkout's 3D-secure measures had left the platform vulnerable to credit card fraud, and a European organized crime syndicate had taken full advantage. Binance ultimately covered the cost of the lost funds, and applied the 3D-secure security measures, sources told Forbes.

Checkout’s spokesperson Jones said that in 2020 “3D-Secure was not a requirement in any country globally. Hence a request to route payment without 3D authentications was certainly not uncommon. To this day, it is only a legal requirement in Europe under SCA rules.”

Binance and Visa didn’t respond to questions about 3D-Secure or the credit card fraud scheme.

Despite the rocky start, Checkout.com doubled down on its relationship with the crypto giant. Binance soon became the payments company’s largest customer, and helped boost its transfer volumes to more than $2 billion a month. “95% of all transactions are going to be crypto in 10 years!” Pousaz tweeted in 2021, quoting Binance’s CEO Changpeng Zhao from an online panel the two men had appeared on.

Last year, Binance announced it was launching its own payments platform, Bifinity, in partnership with PaySafe and Checkout. "Our foundational partnership with Bifinity and the Binance platform is so important,” Max Rothman, Checkout’s vice president of crypto, said at the time.

Though since the implosion of FTX — previously another major crypto client – and mounting regulatory scrutiny on Binance, Checkout.com has reckoned with its all-in bet on crypto, and reportedly slashed its internal valuation to $11 billion in December, and then again in June to around $9 billion. Checkout spokesperson Jones told Forbes that digital assets customers “comprise a low single-digit amount of our group’s total processing volumes.”

In his letter to Binance last week, Pousaz wrote that he was “sorry that we are unable to continue offering our services,” before adding, “we wish you the best of luck with your business moving forward.”

John Hyatt contributed reporting.