The FCA fines Coinbase subsidiary $4.5 million for high-risk customer breaches
In a significant move, the UK’s Financial Conduct Authority (FCA) has imposed a hefty fine of $4.5 million on Coinbase Group subsidiary CB Payments Limited (CBPL) for repeatedly violating anti-money laundering regulations.
This enforcement action by the FCA marks a milestone as it is the first time the regulatory body has taken such measures against a cryptocurrency company under the 2011 Electronic Money Regulations.
Agreement to stop onboarding high-risk customers
Despite entering into a voluntary agreement with the FCA in October 2020 to cease onboarding high-risk customers, CB Payments Limited continued to admit 13,416 such customers. These individuals deposited approximately $24.9 million, leading to $226 million in withdrawals and crypto transactions through other Coinbase entities.
The FCA’s investigation revealed that CBPL failed to implement effective controls to comply with the voluntary requirements (VREQ), resulting in significant breaches going undetected for nearly two years.
Therese Chambers, the FCA’s joint executive director of enforcement and market surveillance, emphasized the severity of the situation, noting that CBPL’s inadequate controls posed a significant risk of criminals using the platform for money laundering.
Response from Coinbase and the FCA
Following the FCA’s findings, Coinbase responded by stating its commitment to regulatory compliance and enhancing controls to meet regulatory obligations more effectively.
The FCA acknowledged CBPL’s cooperation during the investigation and granted a 30% discount on the fine for early resolution of the issue.
Implications for the cryptocurrency industry
The FCA’s action sets a precedent for holding cryptocurrency companies accountable for anti-money laundering obligations. Kate Gee, a cryptocurrency disputes expert, highlighted the importance of robust financial crime controls in the industry.
Gee warned that businesses failing to prevent financial crime and comply with regulations would face enforcement action, signaling increased scrutiny for cryptocurrency exchanges in the UK.
In conclusion, the FCA’s decisive enforcement action underscores the necessity of stringent financial crime controls in the cryptocurrency sector, prompting other platforms to enhance their compliance frameworks to avoid similar penalties in the future.
