Coinbase’s UK subsidiary, CB Payments Limited (CBPL), has been fined $4.5 million by the Financial Conduct Authority (FCA) for breaching an agreement that restricted the onboarding of high-risk customers. This agreement, established in October 2020, aimed to mitigate money laundering risks. Despite these measures, CBPL onboarded 13,416 high-risk customers, leading to significant regulatory violations. The FCA criticized CBPL’s weak control mechanisms and emphasized the increased risk of criminal activities. In response, Coinbase acknowledged the breach and is working to enhance its compliance systems to prevent future violations.
Breach of FCA Agreement
In October 2020, CB Payments Limited (CBPL) entered into a voluntary agreement with the Financial Conduct Authority (FCA) to restrict onboarding new customers identified as high-risk and from providing services to these individuals. The goal was to mitigate money laundering risks and maintain market integrity.
Significant Regulatory Violations
Despite the agreement, CBPL onboarded 13,416 high-risk customers, prompting the FCA to impose a £3.5 million ($4.5 million) fine. The FCA’s joint executive director, Therese Chambers, highlighted major weaknesses in CBPL’s controls and emphasized the increased risk of criminal activities due to these violations.
Coinbase’s Response
Coinbase has acknowledged the FCA’s findings and emphasized its commitment to regulatory compliance. The exchange clarified that the onboarding of high-risk customers was unintentional and constituted only 0.34% of the total new customers during the period from October 30, 2020, to October 1, 2023. Coinbase is working to improve its control mechanisms to prevent future breaches.
Market Impact
Following the announcement of the fine, Coinbase’s stock (COIN) experienced a 1.94% drop in the U.S. premarket trading session.
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