The UK’s financial regulator, the Financial Conduct Authority (FCA) recently fined a Coinbase unit £3.5 million for allowing high-risk customers to trade on its platform.
Coinbase’s CBPL unit kept breaching limitations
The fined unit is known as Coinbase’s CB Payments Limited (CBPL) — a business that doesn’t offer crypto transactions, but instead, it operates as a gateway for users to make trades by using other businesses within Coinbase’s group.
Back in 2020, there were concerns regarding the CBPL’s financial crime control framework, and at the time, it responded by entering a voluntary requirement that stopped it from accepting new high-risk customers.
However, according to the FCA, CBPL did not respect this limitation. Instead, it onboarded or provided e-money services to around 13,416 customers who are considered high-risk. More than that, these users worked with major amounts of money, with about a third of them depositing around $24.9 million.
The funds were used to make withdrawals and make crypto transactions through other Coinbase-related entities. In total, these customers were responsible for around $226 million flowing through Coinbase’s services.
According to the FCA, the breaches were caused by the CBPL’s lack of due skill, care, and diligence when it came to the design, testing, monitoring, and implementation of the controls that were put in place to ensure the voluntary requirement was effective.
CBPL’s controls contained major weaknesses
The regulator’s joint executive director for enforcement and market oversight, Therese Chambers, commented on the situation. She said that the money laundering risks associated with digital assets are obvious. This is why companies have to take them seriously. This is also the reason why firms like CBPL, which enable crypto trading, must have stronger financial crime controls.
Chambers added that the CBPL’s controls contained several major weaknesses and that the regulator recognized them and warned the company of them. It was why such strict requirements were needed in the first place. But, CBPL repeatedly breached the requirements set into place, hence the £3.5 million fine.
Chambers concluded by saying: “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.”
Commenting on the development, Coinbase said that the company welcomes regulation and is dedicated to working proactively and closely with the most sophisticated financial regulators around the world. That includes the FCA, and it is the company’s goal to ensure that its platforms and offerings are compliant, trusted, and secure.