Coinbase Fined $4.5 Million Over ‘High Risk’ Customers

Coinbase has been fined $4.5 million by a U.K. regulator for serving “high-risk” customers.

The fine, announced Thursday (July 25) by the Financial Conduct Authority (FCA), was levied against a subsidiary of the cryptocurrency exchange, CB Payments Limited (CBPL), which the FCA says repeatedly violated a requirement preventing the company from doing business with high-risk clients.

“The money laundering risks associated with crypto are obvious and firms must take them seriously,” Therese Chambers, joint executive director of Enforcement and Market Oversight at the FCA, said in a news release.

“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. CPBL, however, repeatedly breached those requirements.”

According to the FCA, CPBL agreed not to take on new high-risk customers in 2020, after the regulator expressed concerns about the company’s financial crime control network.

But despite this agreement, the FCA said, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers, who made multiple crypto asset transactions through other Coinbase Group entities, totaling around $226 million.

The FCA said CBPL demonstrated a “lack of due skill, care and diligence in the design, testing, implementation and monitoring” of its financial controls, with “repeated and material breaches” going undiscovered for nearly two years.

“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,” Coinbase said in a statement posted to its blog.

The FCA notes that this action was taken under the U.K.’s 2011 electronic money regulations, and marks the first time the regulator has taken enforcement action using these powers.

The fine comes as the need for clear regulatory frameworks remains one of the most pressing issues facing the crypto space, as PYMNTS wrote earlier this month.

“Clear regulations can protect consumers, reduce fraud and encourage institutional investment, while regulatory uncertainty or overly restrictive regulations can stifle innovation and hinder technological advancements, lead to market instability and drive businesses to more crypto-friendly jurisdictions,” that report said.

The report added that the U.S. Securities and Exchange Commission (SEC) and other regulatory bodies are working on frameworks for cryptocurrencies, but there is still substantial uncertainty, while Europe’s Markets in Crypto-Assets (MiCA) regulation offers a more unified regulatory approach.

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