- Coinbase unit CB Payments Limited fined £3.5 million by FCA for compliance failures with high-risk customers.
- The FCA highlighted lapses in financial crime controls, revealing significant monitoring inadequacies.
- Coinbase’s compliance protocols questioned despite significant investment in customer safety measures.
A unit of Coinbase Global Inc., CB Payments Limited, was fined £3.5 million ($4.5 million) by the UK’s Financial Conduct Authority (FCA) for offering cryptoasset trading services to high-risk customers. This marks the first action of its kind from the regulator, which is intensifying its scrutiny of money laundering controls within digital currency firms.
FCA Fines Coinbase Unit for Compliance Failures
The FCA announced that CB Payments Limited breached a voluntary agreement by providing services to 13,416 high-risk customers. Approximately 31% of these customers deposited $25 million, which was then utilized to execute transactions via Coinbase Group entities, totaling around $226 million. The FCA highlighted that the firm repeatedly failed to adhere to agreed compliance measures, exposing significant vulnerabilities in its financial crime controls.
Coinbase Emphasizes Compliance and Safety
In response to the FCA’s findings, Coinbase emphasized its commitment to compliance and customer safety. The company stated in a blog post, “Our commitment to compliance is among the strongest in the industry, ensuring that our customers can feel secure and protected on our platforms.” Despite these assurances, the breaches have raised questions about the effectiveness of Coinbase’s compliance protocols.
Role of CB Payments Limited Within Coinbase Group
CB Payments Limited does not directly offer cryptoasset transactions. Instead, it serves as a gateway for customers to trade through other entities within the Coinbase Group. This structure was intended to enhance security and compliance, yet the FCA’s investigation revealed significant lapses in the firm’s diligence and monitoring processes. The voluntary agreement with the FCA was established in October 2020 to address concerns about the firm’s financial crime controls.
Monitoring and Compliance Failures
The FCA identified several areas where CB Payments Limited failed to implement necessary rules. The rule-breaking activities went undetected for two years due to inadequacies in the firm’s compliance monitoring. This oversight allowed high-risk customers to conduct substantial transactions without appropriate scrutiny, undermining the intended safeguards of the voluntary agreement.
Coinbase Market Presence and Regulatory Status
While Coinbase does not disclose the number of its UK customers, the nation represents its second-largest market after the US. Coinbase holds an e-money license and is listed on the FCA’s anti-money laundering register for cryptoasset businesses. Despite these credentials, the recent fine and compliance issues highlight the challenges the company faces in maintaining robust financial crime controls.
Importance of Addressing Money Laundering Risks
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, emphasized the importance of addressing money laundering risks associated with crypto. She stated, “The money laundering risks associated with crypto are obvious and firms must take them seriously.” This sentiment underscores the FCA’s determination to enforce stringent compliance standards within the rapidly evolving digital currency sector.
Conclusion
The £3.5 million fine imposed on CB Payments Limited by the FCA underscores the critical importance of stringent compliance and robust financial crime controls in the cryptoasset industry. Despite Coinbase’s significant investment in compliance, the breaches identified highlight the ongoing challenges in effectively monitoring and managing high-risk customer activities. As the digital currency market continues to grow, firms like Coinbase must prioritize and continually enhance their compliance frameworks to safeguard against financial crime and maintain regulatory trust.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from CryptoNewsBytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.
