Coinbase fined $4.5m by UK regulator for high-risk customers

Coinbase was on Thursday slapped with a $4.5 million fine by the UK regulator, the Financial Conduct Authority (FCA) for serving high-risk customers.  The fine was levied against the exchange’s subsidiary, CB Payments Limited (CBPL).                                                                     

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The FCA accused CBPL of breaching some regulatory requirements to improve its guardrails against financial crimes, in what Reuters reported to be the first sanction of its kind in the UK’s crypto assets sector.

FCA slams CBPL for repeated breach of agreement

According to FCA, CBPL agreed it would not take any new high-risk clients by improving its financial crime controls after a visit by the regulator in October 2020. However, the company went on to provide e-money services to 13,416 high-risk customers with almost a third of that depositing $24.9 million.

The regulator further indicated that the customers made crypto asset transactions through Coinbase entities totalling $226 million. The company repeatedly breached the voluntary agreement undetected for almost two years.

“CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed,” said Therese Chambers, a joint executive director of enforcement at the FCA. “CBPL, however, repeatedly breached those requirements,” added Chambers.

The regulator stated that CBPL demonstrated a “lack of due skill, diligence in the design, testing, implementation, and monitoring” of its financial controls.

Coinbase’s fine is a warning shot to take crime controls seriously

CBPL agreed to resolve the matter and will pay $4.5 million (3.5 million pounds) after getting a 30% discount.

“We take the FCA’s findings and our broader regulatory compliance very seriously and CBPL continues to proactively enhance its controls to ensure compliance with its regulatory obligations,” said Coinbase.

A crypto litigation lawyer at Signature Litigation, Kate Gee, said this serves as a warning for companies to take financial crime controls very seriously.

“Firms that do not do enough to protect against financial crime and who fail to comply with operational restrictions in place will face scrutiny and enforcement action.”

Gee.

The FCA also pointed out that this action was implemented under the UK’s 2011 electronic money regulation and becoming the first time the regulator has taken enforcement using these powers.

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This also comes at a time when the need for clear regulatory framework is critical and is one of the issues confronting the crypto assets industry. Although there are still some gaps, regulators are working on frameworks for the crypto industry with Europe’s Markets in Crypto Assets (MiCA) offering a more unified regulatory approach, according to PYMNTS.