Coinbase UK unit fined $4.5 million for violating high-risk customer ban

Coinbase’s UK subsidiary CB Funds Restricted (CBPL) has been fined $4.5 million by the UK’s monetary regulator, the Monetary Conduct Authority (FCA), for a number of breaches of necessities prohibiting the corporate from offering providers to high-risk prospects.

Whereas CBPL itself doesn’t course of cryptocurrency transactions for shoppers, it acts as a “gateway” for transactions by way of different entities inside the Coinbase group. Nonetheless, CBPL just isn’t at the moment registered within the UK for cryptocurrency actions.

Violation of cryptocurrency buying and selling restrictions

In October 2020, the agency entered right into a Voluntary Requirement (VREQ) following quite a few contacts with the FCA over considerations concerning the effectiveness of CBPL’s monetary crime management framework. It restricts CBPL from admitting new high-risk prospects till the framework points are resolved.

Regardless of the restrictions, the monetary regulator accused CBPL of offering e-money providers to 13,416 high-risk prospects, in line with FCA officers Press release.

About 31% of those shoppers have deposited roughly $25 million. This quantity was then used to withdraw and execute a number of crypto transactions by way of different Coinbase Group entities, totaling roughly $226 million.

The FCA reported that the breaches have been brought on by CBPL’s lack of adequate talent, care and diligence in creating, testing and monitoring controls designed to implement VREQ. This additionally contains failing to contemplate varied buyer onboarding situations.

The company additional highlighted that flaws in preliminary monitoring allowed main breaches to go unnoticed for practically two years.

Weaknesses of CBPL Controls

Commenting on the newest enforcement motion in opposition to Coinbase Group entities, Therese Chambers, Co-Govt Director of Enforcement and Market Oversight on the FCA, mentioned:

“The cash laundering dangers related to cryptocurrencies are clear and corporations should take them significantly. Corporations like CBPL that assist cryptocurrency buying and selling must have sturdy monetary crime controls. CBPL’s controls had important deficiencies, and the FCA additionally knowledgeable, Because of this these necessities are wanted, but CPBL has repeatedly violated them.

Chambers additionally warned of the rising danger of criminals utilizing the platform to launder the proceeds of crime.

On the identical time, this enforcement motion was carried out underneath the Digital Cash Laws 2011, marking the primary time that the FCA has used these powers for enforcement.