Key Insights
- UK’s FCA fines Coinbase subsidiary CBPL £3.5 million for breaching high-risk customer restrictions
- CBPL onboarded 13,416 high-risk customers despite voluntary restrictions, leading to $226 million in crypto transactions
- This marks the FCA’s first enforcement action under the Electronic Money Regulations 2011
LONDON (MarketsXplora) – Britain’s Financial Conduct Authority (FCA) has imposed a fine of £3,503,546 ($4.5 million) on CB Payments Limited (CBPL), a subsidiary of U.S.-based cryptocurrency exchange Coinbase, for repeatedly violating restrictions on servicing high-risk customers, the regulator announced on Thursday.
This marks the first time the FCA has taken enforcement action under the Electronic Money Regulations 2011, signaling a heightened focus on compliance within the rapidly evolving cryptocurrency sector.
CBPL, which operates as a gateway for customers to trade cryptoassets via other Coinbase Group entities but does not directly engage in cryptoasset transactions, agreed to a voluntary requirement (VREQ) in October 2020 following FCA concerns about its financial crime control framework. The VREQ explicitly prohibited CBPL from onboarding new high-risk customers while addressing these issues.
However, the FCA found that CBPL had “repeatedly breached” this requirement, onboarding and providing e-money services to 13,416 high-risk customers despite the restrictions. Approximately 31% of these customers deposited around $24.9 million, which was subsequently used to execute cryptoasset transactions totaling approximately $226 million through other Coinbase Group entities.
Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA, emphasized the gravity of the situation:
“The money laundering risks associated with crypto are obvious and firms must take them seriously. 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.”
The regulator criticized CBPL for lacking “due skill, care and diligence” in designing, testing, implementing, and monitoring controls to ensure compliance with the VREQ. Notable failures included not considering all potential customer onboarding routes when designing controls and inadequate initial monitoring, which left material breaches undetected for nearly two years.
“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,” Chambers added.
CBPL, which is not currently registered to undertake cryptoasset activities in the UK, agreed to resolve the matter and qualified for a 30% discount on its fine. The company has not yet issued a public statement regarding the penalty.
Meet Samson Ononeme, a dynamic writer, editor, and CEO of marketsxplora.com. With a passion for words and a sharp business acumen, he captivates readers with captivating storytelling and delivers insightful market analysis.