- CB Payments Limited (CBPL) a subsidiary the Coinbase Group fined $4.5 million by FCA for onboarding high-risk customers.
- Breaches occurred despite a 2020 agreement to halt onboarding high-risk customers.
- This is FCA’s first action under Electronic Money Regulations 2011 against a crypto firm.
In a landmark decision, the Financial Conduct Authority (FCA) has fined the UK’s Coinbase subsidiary, CB Payments Limited (CBPL), £3.5 million ($4.5 million) for repeated breaches of anti-money laundering regulations.
This enforcement marks the first action taken by the FCA under the Electronic Money Regulations 2011 against a cryptocurrency firm.
CBPL had agreed with the FCA not to onboard high-risk customers
In October 2020, CB Payments Limited (CBPL), part of the Coinbase Group, entered a voluntary agreement with the FCA to halt the onboarding of high-risk customers.
This agreement aimed to bolster the firm’s financial crime controls, which had significant weaknesses as per the FCA’s assessment.
However, despite the restrictions, CBPL proceeded to onboard 13,416 high-risk customers. These customers deposited approximately $24.9 million, which was used for withdrawals and crypto transactions amounting to $226 million through other Coinbase entities.
The FCA’s investigation revealed that CBPL failed to exercise due skill, care, and diligence in designing, testing, implementing, and monitoring controls to comply with the voluntary requirement (VREQ).
The firm did not adequately consider all potential customer onboarding methods, leading to substantial breaches that went undetected for nearly two years.
The Joint Executive Director of Enforcement and Market Oversight at the FCA, Therese Chambers, in a statement issued on July 25, highlighted the severity of the situation stating that CBPL’s controls had significant weaknesses, and the FCA told it so, which is why the requirements were needed.
According to the statement, CBPL, however, repeatedly breached those requirements. This increased the risk that criminals could use CBPL to launder the proceeds of crime. We will not tolerate such laxity, which jeopardizes the integrity of our markets.
The Coinbase subsidiary received a 30% discount on the fine
Coinbase responded to the FCA’s findings, stating that it takes regulatory compliance very seriously and is actively enhancing its…