Coinbase Fined £3.5 Million by UK’s FCA for Lax Money Laundering Controls

Coinbase, one of the largest cryptocurrency exchanges globally, has been fined £3.5 million ($4.5 million) by the UK's Financial Conduct Authority (FCA) for providing payment services to over 13,000 "high-risk" customers. This fine represents the first enforcement action by the FCA against a company facilitating cryptocurrency trading.

The penalty was levied against CB Payments Ltd (CBPL), the UK subsidiary of Coinbase, due to concerns about inadequate money laundering oversight. After the FCA raised issues regarding CBPL's financial crime controls, the firm agreed to a voluntary requirement in October 2020, which prevented it from onboarding new high-risk customers while it addressed these control deficiencies.

Despite these restrictions, "CBPL onboarded and/or provided e-money services to 13,416 high-risk customers," the FCA stated. Approximately 31% of these customers deposited around USD $24.9 million. The FCA further noted that these funds were used for withdrawals and to execute multiple transactions through other Coinbase Group entities, amounting to approximately USD $226 million.

The FCA attributed these breaches to CBPL’s lack of due skill, care, and diligence in designing, testing, implementing, and monitoring its controls. In response, Coinbase stated, “We take the FCA’s findings and our broader regulatory compliance very seriously. We are always willing to acknowledge when we fall short, and to make improvements, which is what we have done here.” Coinbase emphasized that the high-risk individuals represented just 0.34% of those onboarded by CBPL over the past three years.

The FCA issued the penalty under the UK’s Electronic Money Regulations 2011, marking the first time it has taken enforcement action using these powers. This contrasts with the approach of US regulators, who have been more aggressive in pursuing digital assets companies. For instance, in April, the US Securities and Exchange Commission sought penalties exceeding $5 billion from the collapsed cryptocurrency firm Terraform Labs and its co-founder Do Kwon.

Therese Chambers, joint Executive Director of Enforcement and Market Oversight at the FCA, emphasized that the fine against CBPL signals the regulator’s intolerance for weak anti-money laundering (AML) controls. "The money laundering risks associated with crypto are obvious and firms must take them seriously," she stated. "Firms like CBPL that enable crypto trading need to have strong financial crime controls. CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed. CBPL, however, repeatedly breached those requirements. This increased the risk that criminals could use CBPL to launder the proceeds of crime."

By fLEXI tEAM