Coinbase UK Fined $4.5M
Coinbase’s UK subsidiary, CBPL, was fined $4.5M by the FCA for failing to improve anti-money laundering controls despite prior warnings.
CB Payments Limited (CBPL), part of the Coinbase Group, was fined $4.5 million by the UK's Financial Conduct Authority (FCA) for insufficient anti-money laundering (AML) measures. The FCA reported that CBPL provided e-money services to around 13,000 high-risk customers despite earlier warnings and agreements to enhance their AML controls.
CBPL, a regulated electronic money institution (EMI), facilitates UK customers trading crypto assets within the Coinbase Group. In late 2020, the FCA warned CBPL about its AML practices, prompting an agreement to improve and avoid high-risk customers in the UK. However, the FCA discovered that CBPL continued serving high-risk clients, handling $24.9 million from 31% of these customers over two years.
Therese Chambers, FCA’s joint executive director of enforcement, stated, “CBPL’s controls had significant weaknesses, and the FCA informed them, necessitating the requirements. Yet, CBPL repeatedly breached these requirements.” This underscores the FCA's concerns over CBPL's repeated non-compliance.
Coinbase defended itself in a blog post, stating, “...unintentionally onboarded some customers between Oct. 30, 2020, and Oct. 1, 2023, (representing 0.34% of customers on-boarded) who were classified as high-risk.” Despite this explanation, the fine represents the FCA’s first enforcement action against a crypto business under the 2011 Electronic Money Regulations, which typically oversee smaller digital payment companies.
This action is significant as it marks the FCA’s first move against a crypto-related business under these regulations. Designed to regulate digital payment services, the 2011 Electronic Money Regulations ensure companies follow strict AML and compliance standards.
The FCA’s $4.5 million fine reflects the seriousness of CBPL's breaches and the importance of strong AML controls in the digital asset industry. The FCA noted that CBPL’s agreement to “resolve the matter” earned it a 30% discount on the fine, recognizing their cooperation.
This case emphasizes the need for solid AML practices for companies in the cryptocurrency and digital payment sectors. With global regulatory scrutiny increasing, firms must ensure their compliance measures are effective and strictly enforced to prevent financial crimes.
In summary, the $4.5 million fine on CB Payments Limited by the FCA highlights major shortcomings in the company's AML controls. Despite previous warnings and agreements, CBPL continued to serve high-risk customers, resulting in hefty penalties. This enforcement action under the 2011 Electronic Money Regulations underscores the need for rigorous AML controls and compliance in the growing digital asset space. As the industry expands, regulatory actions like this are expected to become more common, highlighting the importance of following financial regulations.
