Coinbase UK Subsidiary Penalized with Record Fine for Compliance Failures

• FCA fines Coinbase’s UK unit £3.5M for failing to meet financial crime controls, marking a first in the UK’s crypto sector.
• Despite 2020 warnings, CB Payments Limited processed high-risk transactions, exposing significant compliance lapses.
• The penalty emphasizes the crypto industry’s need for stringent financial crime measures to avoid severe regulatory repercussions.

The Financial Conduct Authority (FCA) has fined CB Payments Limited (CBPL), a subsidiary of Coinbase in the UK, a hefty sum of £3.5 million ($4.5 million) for failing to meet financial crime control standards. This penalty represents a first for the UK’s cryptocurrency sector, stressing the critical need for stringent compliance measures within the industry.

CBPL was originally scrutinized by the FCA in 2020, resulting in a regulatory agreement that required the firm to bolster its financial crime defenses. However, despite these directives, CBPL continued to service and process substantial amounts of money for over 13,000 high-risk customers, involving nearly $25 million in deposits and $226 million in transactions across Coinbase entities. 

The failure to adhere to the agreement and the continued processing of high-risk client transactions underlines a significant oversight in compliance.

The FCA’s investigation highlighted not just isolated incidents but prolonged non-compliance over nearly two years, during which CBPL’s financial crime controls were found wanting on multiple occasions. The agency had previously identified significant deficiencies in the company’s measures designed to prevent such breaches, which the fine aims to address.

In response to the FCA’s penalty, Coinbase has reaffirmed its commitment to maintaining rigorous compliance with regulatory standards, emphasizing its focus on security and regulatory adherence. The broader crypto industry views this development as a cautionary tale, prompting other firms to enhance their financial crime controls to avoid similar punitive actions.

Legal experts and industry analysts see the FCA’s stern action as a warning to other companies in the cryptocurrency space. Kate Gee, a crypto litigation lawyer, suggests that the FCA is sending a clear message that inadequate controls in financial crime prevention will not only be scrutinized but could lead to significant regulatory consequences.