The Binance resolution includes a provision that is, in many ways, more consequential than the $4.3 billion in penalties: a five-year independent compliance monitorship. For the duration of the monitorship, an external firm will have the authority to review Binance’s operations, assess its compliance programme, and report to the DOJ on whether the exchange is meeting its obligations.
This is the most intrusive remedy available in corporate criminal enforcement. It is also one with a decidedly mixed track record.
What a monitorship is supposed to do
A compliance monitor is not a regulator. The monitor does not approve or reject individual transactions. Their role is to evaluate whether the company has built — and is actually operating — a compliance programme that meets the standards specified in the settlement agreement.
In practice, this means reviewing policies and procedures, testing whether they are implemented, interviewing staff, examining transaction samples, and assessing the compliance culture. The monitor reports to the DOJ (or the relevant court) on a periodic basis, typically quarterly or semi-annually, and can flag deficiencies that may trigger additional penalties or other enforcement action.
The theory is simple: sustained external oversight forces the company to build genuine compliance capabilities rather than the paper programmes that many institutions maintain to satisfy examinations. The monitor sees behind the curtain and reports honestly.
Why monitorships often fail
The theory is better than the practice. Having worked on compliance remediation programmes at large institutions — some under monitorship, some not — I have observed several patterns that undermine the effectiveness of even well-intentioned monitorships.
The most common is scope limitation. Monitors are expensive — the company pays their fees, which can run into tens of millions of dollars per year — and the monitorship agreement defines the scope of the monitor’s authority. Companies routinely negotiate narrow scope provisions, limiting the monitor’s access to specific business lines or geographic regions. The rest of the organisation continues as before.
The second is the “compliance theatre” dynamic. Companies under monitorship learn very quickly what the monitor is looking for and optimise for the review process rather than for genuine compliance outcomes. Policies are rewritten, training records are produced, governance committees are constituted — all of which look excellent in a monitorship report but may or may not reflect how the business actually operates when the monitor is not in the room.
The third is the endgame problem. Monitorships have fixed durations. The institutional incentive is to satisfy the monitor’s requirements for the specified period and then revert to a less intensive compliance posture once the monitorship ends. I have seen this pattern repeatedly in banking: the compliance budget spikes during the consent order period and then declines once the order is lifted.
What would make Binance different
Binance’s monitorship is unusual in several respects that could — could — produce a different outcome.
The scope is broad. Unlike many monitorships that are limited to specific compliance functions, the Binance agreement covers AML, sanctions, counterterrorist financing, and the full range of BSA obligations across the entire global platform. The monitor is not examining one branch or one business line. They are examining the entire operation.
The starting point is near-zero. Most monitorships are imposed on institutions that have an existing compliance programme that fell short. Binance, by its own admission, effectively did not have a compliance programme. The monitor is not evaluating a programme that needs improvement. They are evaluating whether a programme has been built from scratch. This is easier to measure.
The concurrent market exit from the United States removes a significant source of enforcement complexity. With Binance no longer directly serving U.S. customers, the monitorship can focus on the global platform’s structural compliance rather than the jurisdictional whack-a-mole that characterised Binance’s pre-settlement operations.
Whether these factors will produce genuine transformation or merely a more expensive version of compliance theatre is the question that the next five years will answer. The precedent it sets — for crypto and for corporate enforcement generally — will be significant either way.