A Coinbase business in the UK has been fined for not following a regulatory agreement to beef up its defenses against financial crime. This is the first time something like this has happened in the UK crypto sector.
So, the Financial Conduct Authority (FCA) announced that CB Payments Limited (CBPL) – part of the global Coinbase Group – had agreed back in October 2020 to tighten up its financial crime controls after the FCA checked them out. They were supposed to stop taking on new high-risk customers until they sorted things out. But guess what? They went ahead and dealt with 13,416 high-risk customers anyway, with nearly a third depositing a whopping $24.9 million.
This money was then used for multiple crypto transactions with other Coinbase entities, totaling about $226 million! And these breaches of the agreement went unnoticed for almost two years. Therese Chambers from the FCA said that CBPL’s controls had big weaknesses and the FCA made that clear, but CBPL still broke the rules repeatedly.
As a result, CBPL is now facing a £3.5 million ($4.5 million) fine, though they got a 30% discount for agreeing to settle the case.
Coinbase responded saying they welcome regulation and are committed to working with top financial regulators like the FCA to ensure their platform is compliant, trusted, and secure for their customers. Kate Gee, a crypto lawyer at Signature Litigation, mentioned that this fine serves as a warning for firms to take financial crime controls seriously. Firms that don’t do enough to protect against financial crime and fail to comply with restrictions will face scrutiny and enforcement actions.