Coinbase UK Unit Faces $4.5 Million Fine For Violating Financial Crime Conditions

The Financial Conduct Authority (FCA) has slapped the UK subsidiary of Coinbase – CB Payments Limited – with a $4.5 million penalty for breaking a voluntary agreement meant to stop high-risk customers from being onboarded. The FCA brought to light serious problems with the control systems at CBPL.

Coinbase Crossed The Line

CBPL signed a voluntary agreement with the FCA in October 2020 to limit the onboarding of fresh clients judged “high-risk” by the regulator. This agreement was intended to reduce possible criminal activity on the CBPL platform, therefore preserving market integrity and reducing money laundering concerns.

Notwithstanding these protections, the FCA found that CBPL had clearly violated the agreement by onboarding and servicing 13,416 high-risk clients. Joint executive director of enforcement and market monitoring for FCA, Therese Chambers, slammed CBPL’s management for their notable lack of control.

“CBPL’s controls had significant flaws,” Chambers said, “which the FCA had already noted and which led to the FCA implementing these requirements.” Still, CBPL constantly broke these rules.

According to the FCA’s enquiry, these compliance shortcomings raised CBPL’s criminal activity risk including money laundering. The FCA therefore fined $4.5 million to emphasize its zero-tolerance approach towards regulatory violations endangering market integrity.

The first sanction of its sort, according to crypto litigation attorney Kate Gee of Signature Litigation, was a message for companies to take financial crime management extremely seriously.

Firms who neglect to comply with operating limits in place or who do not do enough to guard against financial crime will face scrutiny and enforcement action, Gee warned.

Impact On Shares

The hefty penalties dealt a blow to Coinbase’s stock. The company’s shares sustained a nearly 2% decline following the news.

At the time of premarket trading on Thursday, July 25, the price was $240.30.

Response Of CBPL

Reacting to the FCA’s results, Coinbase said it committed itself to regulatory compliance and acknowledged the infractions. Coinbase said in a statement that CBPL keeps constantly improving its control systems to satisfy legal criteria, and that the FCA also acknowledged CBPL’s investigative assistance.

The exchange explained that just 0.3% of all new clients from October 30, 2020, to October 1, 2023 were high-risk ones, hence their onboarding was accidental. Coinbase underlined its seriousness over the FCA’s conclusions and its continuous attempts to strengthen control systems to stop further breaches.

Investors and the crypto market will be keenly observing as Coinbase attempts to resolve compliance concerns to see how the business keeps its dedication to regulatory criteria and enhances its control systems.

Featured image from Reddit, chart from TradingView