The UK’s Financial Conduct Authority (FCA) has levied a £3.5 million fine on CB Payments Ltd (CBPL), a subsidiary of the cryptocurrency exchange Coinbase, for failing to comply with financial crime regulations. The fine addresses CBPL’s breach of a voluntary requirement (VREQ) agreement, which was supposed to prevent the firm from onboarding high-risk customers until it strengthened its financial crime control measures.
CBPL, which has been authorized as an e-money institution by the FCA since 2017, serves as a gateway for customers to trade cryptoassets via other entities within the Coinbase Group, though it does not directly conduct cryptoasset transactions for customers. In 2020, the FCA identified “significant weaknesses and gaps” in CBPL’s financial crime controls during a visit, prompting the imposition of the VREQ.
Despite this restriction, CBPL onboarded 13,416 high-risk customers from October 2020 to October 2023. These customers deposited approximately $24.9 million, which was subsequently used for multiple cryptoasset transactions totaling around $226 million through other Coinbase entities. The FCA described CBPL’s control failures as serious and persistent, stating that these lapses significantly increased the risk of financial crime being facilitated.
Therese Chambers, FCA’s joint executive director of enforcement and market oversight, emphasized the inherent money laundering risks associated with crypto assets and stressed the need for robust financial crime controls. The FCA noted that CBPL’s repeated breaches of the VREQ jeopardized the integrity of financial markets by potentially enabling criminal activities.
CBPL received a 30% discount on the fine for cooperating with the FCA and agreeing to resolve the matter. Coinbase acknowledged the FCA’s findings and affirmed its commitment to regulatory compliance, stating that CBPL is enhancing its controls to prevent future breaches. The company reiterated its dedication to maintaining high standards of compliance and cooperation with regulators.
Source: fintechfutures.com
