Coinbase Affiliate Fined $4.5 Million for High-Risk Customer Breaches

Coinbase Subsidiary Fined for Anti-Money Laundering Violations

In a significant development, the Financial Conduct Authority (FCA) in the UK has fined Coinbase Group subsidiary CB Payments Limited (CBPL) £3.5 million ($4.5 million) for multiple breaches of anti-money laundering regulations. This enforcement action represents the FCA’s first move against a cryptocurrency company under the 2011 Electronic Money Regulations.

Failure to Comply with Agreement to Stop Onboarding High-Risk Customers

Despite entering into a voluntary agreement with the FCA in October 2020 to refrain from onboarding high-risk customers, CB Payments Limited continued to admit 13,416 such customers. These high-risk clients deposited approximately $24.9 million, leading to $226 million in withdrawals and crypto transactions through other Coinbase entities. The FCA’s investigation revealed significant shortcomings in CBPL’s controls and compliance with voluntary requirements.

Importance of Financial Crime Controls in the Cryptocurrency Space

Kate Gee, an expert on cryptocurrency disputes, emphasized the importance of financial crime controls in the cryptocurrency industry. The FCA’s action serves as a warning to companies to prioritize compliance with anti-money laundering regulations, especially in a sector where the risk of illicit financial activities is heightened. Businesses failing to implement adequate controls may face scrutiny and enforcement actions like the fine imposed on CBPL.

The regulatory landscape for cryptocurrency companies is evolving, and entities operating in the UK must strengthen their compliance frameworks to avoid penalties and maintain market integrity. The FCA’s decisive action against CB Payments Limited underscores the necessity for robust financial crime controls in the digital asset sector.