Key Takeaways
- The penalty is due to CBPL breaching an agreement made in October 2020, which was designed to prevent onboarding high-risk customers
- The FCA found that CBPL onboarded and served 13,416 high-risk customers.
Coinbase’s UK arm, CB Payments Limited (CBPL), has been fined £3.5 million ($4.5 million) by British regulators for violating a voluntary anti-money laundering agreement. This fine marks the FCA’s first enforcement action against a crypto asset trading company.
The penalty is due to CBPL breaching an agreement made in October 2020, which was designed to prevent onboarding high-risk customers. This agreement restricted CBPL from taking on new high-risk clients and from offering services to them.
Despite this, the FCA found that CBPL onboarded and served 13,416 high-risk customers. About 31% of these clients deposited approximately $24.9 million, which was then used to make withdrawals and execute crypto transactions through other Coinbase entities, totalling about $226 million.
“CBPL’s controls had significant weaknesses, and the FCA told it so, which is why the requirements were needed. CBPL, however, repeatedly breached those requirements,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA.
“This increased the risk that criminals could use CBPL to launder the proceeds of crime. We will not tolerate such laxity, which jeopardizes the integrity of our markets.”
In response, Coinbase emphasized its commitment to regulatory compliance. “CBPL continues to proactively enhance its controls to ensure compliance with its regulatory obligations. In its notice, the FCA acknowledged this as well as CBPL’s cooperation with its investigation,” the company stated.
Coinbase admitted that it unintentionally onboarded some high-risk customers between October 30, 2020, and October 1, 2023. This represented 0.34% of the overall new customers signed up by the unit.
The FCA’s action primarily focused on the firm’s e-money transmitter services rather than crypto asset transactions. The case underscores the importance of strong financial crime controls and adhering to operational restrictions.
Kate Gee, a crypto litigation lawyer at Signature Litigation, highlighted the significance of the fine. “Firms that do not do enough to protect against financial crime and who fail to comply with operational restrictions in place will face scrutiny and enforcement action,” Gee stated.
Despite the legal setback, Coinbase’s CBPL will pay the fine with a 30% discount, having agreed to resolve the case.
