- Coinbase Group subsidiary CB Payments Limited (CBPL) has been fined $4.5 million by the FCA for bringing in high-risk customers.
- The breach occurred despite a 2020 agreement to stop taking on high-risk clients.
- This is the FCA’s first action against a cryptocurrency company under the 2011 Electronic Money Regulations.
In a landmark decision, the UK’s Financial Conduct Authority (FCA) fined UK-based Coinbase subsidiary CB Payments Limited (CBPL) £3.5 million ($4.5 million) for repeated breaches of anti-money laundering regulations.
The enforcement marks the FCA’s first action against a cryptocurrency company under the 2011 Electronic Money Regulations.
CBPL Fined $4.5 Million for Anti-Money Laundering Breaches
In October 2020, CB Payments Limited (CBPL), a unit of Coinbase Group, entered into a voluntary agreement with the FCA to stop onboarding high-risk customers. Despite this, CBPL continued to admit 13,416 high-risk customers, leading to a significant breach of regulations.
The FCA’s investigation revealed that CBPL failed to implement adequate controls to comply with the voluntary requirements (VREQ), allowing these breaches to go undetected for nearly two years.
This breach resulted in the flow of approximately $24.9 million in deposits and $226 million in withdrawals and crypto transactions through other Coinbase entities.
Regulatory Response and Coinbase’s Reaction
The FCA imposed a fine of $4.5 million on CBPL, emphasizing the importance of financial crime controls in the cryptocurrency space. Coinbase responded by stating their commitment to regulatory compliance and enhancing controls to meet obligations.
The FCA acknowledged CBPL’s cooperation in the investigation and granted a 30% fine discount for early resolution of the issue.
Implications for Cryptocurrency Companies
The FCA’s action serves as a warning to cryptocurrency businesses to prioritize financial crime controls. Kate Gee, an expert on cryptocurrency disputes, noted that non-compliance could lead to enforcement action and increased scrutiny.
This case underscores the significance of robust financial crime controls in the cryptocurrency industry and highlights the potential for stricter regulations and penalties for non-compliant exchanges.
