The UK’s Financial Conduct Authority (FCA) has fined Coinbase’s UK subsidiary, CB Payments Limited (CBPL), £3.5 million ($4.5 million) for violating anti-money laundering (AML) regulations. This marks the first such action taken by the FCA against a cryptocurrency firm under the Electronic Money Regulations 2011.
CBPL had agreed with the FCA to stop onboarding high-risk customers in October 2020 due to significant weaknesses in its financial crime controls. However, the company continued to onboard over 13,000 high-risk customers, who deposited nearly $25 million and conducted transactions worth $226 million through other Coinbase entities.
The FCA investigation found that CBPL failed to exercise due diligence in designing, testing, and monitoring controls to comply with the voluntary requirement. This led to substantial breaches that went undetected for almost two years.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, emphasized the severity of the situation, stating that CBPL’s laxity increased the risk of criminals using the platform to launder money.
Coinbase acknowledged the findings and stated its commitment to enhancing its controls to ensure regulatory compliance. The FCA acknowledged CBPL’s cooperation in the investigation and granted a 30% discount on the fine for early resolution.
This case serves as a warning to other cryptocurrency firms about the importance of robust financial crime controls and compliance with operational restrictions. The FCA’s action may lead to increased scrutiny of other crypto exchanges operating in the UK and encourage them to reassess their compliance frameworks.
