An entity controlled by Nasdaq-listed cryptocurrency trading platform Coinbase Global Inc (NASDAQ:COIN) has been slapped with a £3.5 million fine from the UK Financial Conduct Authority for failing to prevent high-risk customers from using its platform.
The FCA determined that CB Payments Limited (CBPL), which is a part of Coinbase, repeatedly breached a voluntary requirement that it entered into with the FCA in October 2020.
This agreement prevented CBPL from taking on new high-risk customers while it addressed issues with its framework.
Despite these restrictions, CBPL “onboarded and/or provided e-money services” to 13,416 high-risk customers, according to the FCA.
CBPL does not, nor is it allowed to undertake crypto transactions in the UK, but it does facilitate customers’ onboarding into the wider Coinbase network.
These high-risk customers executed “multiple cryptoasset transactions” via other Coinbase Group entities, totalling approximately $226 million.
The breaches “were the result of CBPL’s lack of due skill, care and diligence in the design, testing, implementation and monitoring of the controls put in place to ensure that the (voluntary requirement) was effective”, said the FCA.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA added: “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.
“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.
“This increased the risk that criminals could use CBPL to launder the proceeds of crime. We will not tolerate such laxity, which jeopardises the integrity of our markets.”
Coinbase is the second-largest crypto exchange by volume, behind only Binance.