Coinbase’s CB Payments Ltd. (CBPL) has been fined £3.5 million ($4.5 million) by the Financial Conduct Authority (FCA) for providing services to high-risk customers despite existing restrictions.
The London-based e-money institution, authorized by the FCA and linked to the cryptocurrency exchange Coinbase, does not offer cryptocurrency services itself but facilitates trading for customers on various Coinbase entities.
Background and Compliance Issues
The FCA’s concerns about CBPL’s controls over financial crime were first raised in February 2020 after a visit to its offices.
Following this, CBPL entered into a voluntary agreement with the FCA, preventing it from taking on new high-risk customers while addressing the identified issues. However, the FCA’s recent release indicated that CBPL had onboarded and/or provided e-money services to 13,416 high-risk customers despite these restrictions.
The FCA noted, “Approximately 31% of these customers deposited around $24.9 million. These funds were used to make withdrawals and then execute multiple cryptoasset transactions via other Coinbase Group entities, totaling approximately $226 million.”
The breaches went undetected for almost two years, which the FCA attributed to CBPL’s insufficient skill in monitoring the controls put in place to ensure the effectiveness of the voluntary agreement. This lack of oversight led to significant financial activity by high-risk customers that contravened the restrictions.
Coinbase’s Response
In response to the FCA’s findings and subsequent fine, Coinbase emphasized its commitment to regulatory compliance. The company stated:
“Coinbase remains committed to high standards of regulatory compliance, and this means partnering with regulators when it comes to compliance and other areas. We are always willing to acknowledge when we fall short, and to make improvements – which is what we have done here.”
