Binance Probe Exemplifies the Perils of ‘Surface Remediation’

Sen. Richard Blumenthal (D-N.Y.), the top Democrat on the Senate Permanent Subcommittee on Investigations, opened a formal inquiry last week into Binance Holdings Ltd. The inquiry involves reports that the exchange facilitated nearly $2 billion in transactions benefiting Iranian entities, including some linked to groups designated as terrorist organizations, and helped evade sanctions on Russian oil.

If these allegations are substantiated, this wouldn’t simply be another corporate compliance lapse. It would show a familiar and troubling pattern reflecting what I call “surface” remediation. It’s reform that looks substantial from the outside but fails to address the deeper cultural and structural conditions that allowed misconduct to flourish in the first place.

Surface remediation is reactive. It satisfies regulators, generates news releases, and may even improve policies on paper. But it leaves intact the internal incentives, power structures, and cultural signals that determine whether misconduct will be prevented the next time.

The alternative is what I call “thick” remediation—a far more demanding process. It doesn’t focus only on whether a company has technically complied with the law. It asks whether the organization has meaningfully changed the conditions that produced the violation. It centers prevention. It protects internal reporting channels. And it confronts uncomfortable truths about culture and leadership.

The difference between the two approaches matters enormously.

Compliance programs in modern corporations operate in four stages: prevention, detection, investigation and remediation. But when firms find themselves in crisis, they tend to fixate on the last stage. They respond to the scandal in front of them. They discipline individuals, pay fines, and revise policies.

Then they move on.

The problem is that remediation divorced from culture rarely prevents recurrence. It may satisfy regulators in the short term and may stabilize markets. But it doesn’t necessarily change how people inside the organization experience risk, responsibility, or voice.

In the Binance matter, the company admitted to serious sanctions and anti-money-laundering failures and was operating under the supervision of monitors. Yet internal investigators reportedly uncovered additional troubling transactions. Even more concerning are allegations that some of those who surfaced concerns were disciplined or removed.

If employees believe that raising compliance issues could cost them their jobs, the compliance system itself begins to erode. The message employees hear isn’t, “We value integrity,” but rather, “We value quiet.”

Culture isn’t—and shouldn’t be treated as—a soft concept. It is infrastructure.

In my management in ethics course, I tell MBA students that organizations derive real value from cultures that empower employees to speak up. A psychologically safe workplace doesn’t simply prevent misconduct. It also fuels innovation.

The same conditions that allow someone to raise a mission-critical risk also allow someone to propose a transformative idea. If employees are afraid to question decisions, they will hesitate to challenge assumptions, refine strategies, or alert leadership when something is going wrong.

That fragility is especially dangerous in areas such as sanctions compliance and anti-money laundering. When the alleged conduct involves sanctioned Iranian entities or efforts to circumvent restrictions on Russian oil, the implications move beyond corporate governance.

Sanctions enforcement is a central tool of US foreign policy and national security. Failures in this space don’t simply expose firms to fines; they risk undermining geopolitical strategy and enabling actors the US has formally designated as threats.

Perfect compliance is impossible. But building a culture that punishes those who try to do the right thing is a choice, not an inevitability.

That is why surface remediation is so dangerous. It focuses on technical compliance—updating manuals, restructuring reporting lines, installing monitors—while leaving underlying conditions intact.

As I remind my law students, remediation that only touches the surface is rarely enough. If you treat the immediate symptoms but ignore the systemic weaknesses that allowed them to occur, your client will return—often with more significant, and more costly, problems. Many corporate scandals aren’t lightning strikes. They are predictable outcomes of ignored warning signs.

Thick remediation, by contrast, asks whether investigators are empowered or sidelined. It examines whether reporting channels are independent and trusted. It evaluates whether leaders model accountability or defensiveness. It demands that firms look not only at what was illegal, but also at what was tolerated.

Congressional investigations and independent monitors can surface problems. They can’t, however, manufacture internal integrity. That work must come from within.

Compliance isn’t about thicker binders or longer policies. It is about whether people inside an organization feel empowered to raise concerns—and whether leadership responds in ways that reinforce that courage rather than suppress it. Until firms recognize that culture is the core of prevention, we should expect the cycle to continue.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Veronica Root Martinez is a professor at Duke University and an expert on corporate misconduct, corporate compliance, organizational ethics, and monitorships.

Write for Us: Author Guidelines