Coinbase UK, a subsidiary of the Coinbase Group, has been fined £3.5 million ($4.5 million) by the Financial Conduct Authority (FCA) for repeatedly breaching anti-money laundering regulations. This marks the first time the FCA has taken action under the Electronic Money Regulations 2011 against a cryptocurrency firm.
The breaches occurred despite an agreement in October 2020 between CB Payments Limited (CBPL) and the FCA to stop onboarding high-risk customers. However, CBPL proceeded to onboard 13,416 high-risk customers, who deposited approximately $24.9 million and conducted transactions totaling $226 million through other Coinbase entities.
The FCA’s investigation revealed that CBPL failed to implement adequate controls to comply with the voluntary requirement (VREQ) and did not consider all potential customer onboarding methods, leading to significant breaches that went undetected for nearly two years.
Therese Chambers, the Joint Executive Director of Enforcement and Market Oversight at the FCA, emphasized the severity of the situation, stating that CBPL’s controls had significant weaknesses and that the firm repeatedly breached the requirements, increasing the risk of money laundering.
In response to the FCA’s findings, Coinbase stated that it takes regulatory compliance seriously and is working to enhance its controls. The FCA acknowledged CBPL’s cooperation in the investigation and granted a 30% discount on the fine for early resolution.
This enforcement action serves as a warning to cryptocurrency firms to prioritize financial crime controls. Kate Gee, a partner at Signature Litigation, highlighted the importance of compliance with anti-money laundering obligations, especially in the crypto sector where money laundering risks are heightened. Firms that fail to protect against financial crime and comply with operational restrictions may face scrutiny and enforcement action.
The FCA’s decision to fine Coinbase UK underscores the significance of robust financial crime controls and may lead other cryptocurrency exchanges in the UK to reassess their compliance frameworks to avoid similar penalties. Overall, the FCA’s actions demonstrate a commitment to holding crypto firms accountable for their anti-money laundering responsibilities.