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In short, Dutch police ordered Binance (cryptocurrency exchange) to freeze funds of some Colombian customers, and those customers are supposed to prove - to the satisfaction of Dutch police - that their funds were legally obtained. This is related to a money laundering investigation by the Dutch. The full article translated by Google Translate from Spanish. (The translation quality is good, there are just minor errors, like referring to the female lawyer as "he".)

At first sight, this looks like a blatant overreach by the Dutch police. What if there is difference in how money laundering is defined in Colombia and in Netherlands, or a difference in what constitutes legally obtained funds? Are Colombian citizens supposed to know and obey Dutch law?

I could understand this if Binance were a Dutch company, and/or if they included in their ToS a clause like "all disputes between the Conpany and the Customer will be decided according to the Dutch law by Dutch courts". But this is not the case - ToS mention law of Hong Kong (https://www.binance.com/en/terms , section X.2)

So the main question is: on what basis could the Dutch claim their jurisdiction? Or could it be that the Dutch did not request the freeze in a legally binding way, they just advised Binance to comply? But according to the article, Binance had to freeze the funds.

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  • Some points in the article make no sense. Proving a negative (as in proving "to have] no ties to those who are involved") can be extremely difficult or impossible even if the negative is truthful. It also overrides the presumption of innocence, which in any case is the prosecutor's burden rather than the counterparty's. Altogether it is odd for the lawyer to allegedly suggest "go ahead and join the legal proceedings on the basis of presumption of innocence, but make sure you are able to prove it". Commented Apr 6, 2022 at 13:51

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Countries have jurisdiction in criminal matters primarily because either (1) the crime affects people in their country, or (2) the crime is carried out in their country.

The Netherlands is well within established norms of criminal jurisdiction to enforce money laundering laws that impact commerce in or with the Netherlands, which appears to be what happened in this case.

Also, the locus of where a crime that takes place on the Internet occurs is also somewhat nebulous. If Dutch residents are parties to those transactions, and the transactions constitute money laundering under Dutch law, there is a fair argument that the money laundering transactions take place in the Netherlands for legal purposes.

The main issue, as a practical matter, is what the Netherlands can do in order to force Binance to comply with its orders if Binance fails to do so.

The political and legal reality is that as long as the Dutch courts have the practical ability to enforce their orders, the Netherlands has jurisdiction to enforce those orders from a legal perspective if the Dutch courts agree that they have the power to do so.

I lack the technical level understanding of the operations of Binance to know precisely what the Dutch government could do in this case, however. Someone with a deeper technical understanding will have to address that issue. It could simply be that the Dutch government is confident that it could successfully extradite Binance officials who willfully disobeyed its orders from whatever countries they reside in.

Usually extradition is available, if there is an extradition treaty in force, if both countries have laws criminalizing the same basic type of conduct with similar degrees of seriousness. So, if the country where the Binance officials are located has a money laundering law that is in broad outline similar to that of the Dutch money laundering law, and if the two countries have an extradition treaty, the Dutch threat to have the offenders outside the Netherlands arrested and extradited to the Netherlands is a credible one.

According to Wikipedia:

Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands.

Binance was founded by Changpeng Zhao, a developer who had previously created high frequency trading software. Binance was initially based in China, but later moved its headquarters out of China following the Chinese government's increasing regulation of cryptocurrency.

In 2021, Binance was put under investigation by both the United States Department of Justice and Internal Revenue Service on allegations of money laundering and tax offenses. The UK's Financial Conduct Authority ordered Binance to stop all regulated activity in the United Kingdom in June 2021.

Japan, Thailand, and Malta (another E.U. member) are also involved in enforcement efforts against Binance.

Under the circumstances, it looks like the Netherlands would probably have the U.S., the U.K., E.U., Japanese, and Thai money laundering officials on its side, so it could expect considerable cooperation in its international efforts to enforce it orders.

While officially organized in the Cayman Islands (a notorious tax and asset protection haven), it appears that the brain trust of the organization is based in China, which might not be so cooperative. But, multinational business executives can be greatly hampered if warrants for their arrest are outstanding in much of the world.

Also, China, while it is prone to ignore business corruption for extended periods of time, every now and then embarks on harsh, mass, anti-corruption campaigns in which large numbers of allegedly corrupt business people are executed or imprisoned with little or no formal due process in short order and with little warning. So, Chinese based executives of the company know that if they become too much of a problem to the Chinese government and the Communist Party of China, that they can be "thrown under the bus" in a manner much more literal than the way that this term is usually used. Chinese billionaires have short life expectancies.

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    wow, ohwilleke himselfs. :) Well, my worry/unwritten subquestion was that if China or some dictatorship doesn't like some customer of Binance, whether that customer could be easily targeted by said dictatorship, money laundering being just pretext. With your answer, it seems that perhaps not, although it depends on whether Binance executives want to visit this dictatorship, and its extradition treaties.
    – xmrk
    Commented Apr 5, 2022 at 18:00
  • @xmrk "it depends on whether Binance executives want to visit this dictatorship, and its extradition treaties." Mostly. Also, countries can crack down on Binance customers which makes it hard to use crypto through it in legal commerce.
    – ohwilleke
    Commented Apr 5, 2022 at 18:15
  • Those customers must prove their funds are legal - but according to which law? If, say, a Canadian customer has funds from sale of marihuana (legal in Canada AFAIK), sends funds to Binance and needs proof, can the police say "nope, illegal to sell in Netherlands, funds are seized"? (not sure about exact situation in Netherlands, it is somewhat tolerated, so just imagine a stricter country, say France or US, demanding proof).
    – xmrk
    Commented Apr 5, 2022 at 18:20
  • @xmrk Money laundering usually consists of concealing the source of funds, not just establishing that the source is legal. And, a country can apply its own law if it is affected. The Dutch are not obligated to lets visitors to its country or its own residents freely use marijuana proceeds in commerce in the Netherlands, merely because they invest the proceeds in cyptocurrencies.
    – ohwilleke
    Commented Apr 5, 2022 at 18:27
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    @xmrk "laws of which country should I follow, to ensure my funds at Binance are not confiscated?" All of them. Not kidding.
    – ohwilleke
    Commented Apr 5, 2022 at 19:32

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