Despite detecting significant weaknesses in CBPL’s control, the firm repeatedly refused to comply with the requirements and onboarded 13,416 high-risk customers for e-money services.
The UK’s Financial Conduct Authority (FCA) has fined Coinbase’s UK subsidiary CB Payment Limited (CBPL) £3.5 million ($4.5 million) for serving high-risk customers.
CBPL operates a globally accessible crypto asset trading platform. Although the firm does not facilitate crypto transactions for customers, it serves as an intermediary, enabling customers to trade digital assets through other entities within the Coinbase Group. The company is not registered to conduct cryptocurrency activities in the UK, according to the FCA.
In October 2020, CBPL agreed to a voluntary requirement (the VREQ) after extensive discussions with the FCA regarding concerns about the effectiveness of its financial crime control framework. The VREQ restricted CBPL from onboarding new high-risk customers until it resolved the identified issues with its framework.
“Despite the restrictions in place, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers,” the FCA said in a press release.
CBPL’s Transaction Tops $226M
The release also noted that approximately 31% of customers deposited about $24.9 million. The funds were used for withdrawals and subsequently to execute numerous crypto asset transactions through various Coinbase Group entities, amounting to roughly $226 million.
According to the FCA, the breaches went undetected for nearly two years because of CBPL’s inadequate oversight of the controls established to ensure the agreement’s effectiveness.
Commenting on the latest development, Therese Chamber, joint executive director of enforcement and market oversight at FCA, said:
“The money laundering risks associated with crypto are obvious, and firms must take them seriously. Firms like CBPL that enable crypto trading need to have strong financial crime controls.”
FCA Identifies Flaws in CBPL’s Controls
Chamber also highlighted that the FCA identified significant weaknesses in CBPL’s controls and informed the company, necessitating the implementation of specific requirements. Despite this, CBPL repeatedly failed to comply with those requirements.
The FCA executive director explained the risk of criminals exploiting CBPL to launder illicit funds. He said such negligence would not be tolerated and would threaten the market’s integrity.
