Breaking: Coinbase UK Arm Faces $4.5M Fine For Onboarding High-Risk Customers

The United Kingdom regulators have imposed a $4.5 million (£3.5 million) fine on Coinbase’s UK arm, CB Payments Limited (CBPL). The penalty concerns the breach of a voluntary agreement designed to prevent the onboarding of high-risk customers. The U.K.’s Financial Conduct Authority (FCA) announced the fine on Thursday, citing significant weaknesses in CBPL’s control mechanisms.

Coinbase UK Arm Faces Major Penalty

Earlier, in October 2020, Coinbase’s UK branch, CBPL, agreed to a voluntary arrangement with the Financial Conduct Authority (FCA). This arrangement restricted CBPL from accepting new customers identified as “high-risk” by the regulator. Moreover, it also barred the company from providing services to these high-risk individuals.

The purpose of this agreement was to reduce the risk of money laundering and to maintain the integrity of the market. It aimed at preventing potentially illegal activities on the CBPL platform. However, despite these measures, the FCA found that CBPL had onboarded and served 13,416 “high-risk customers.”

Furthermore Therese Chambers, FCA’s joint executive director of enforcement and market oversight, vehemently criticized Coinbase’s CBPL for its shortcomings. “CBPL’s controls had major weaknesses, and the FCA had already pointed this out, which led to the implementation of these requirements. Nevertheless, CBPL continually violated these requirements,” Chambers remarked.

In addition, she highlighted that the poor compliance raised the risk of criminal activities, including money laundering, within CBPL. As a consequence of these violations, the FCA imposed a £3.5 million ($4.5 million) fine on the prominent crypto exchange‘s UK subsidiary.

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CBPL Responds To Regulators

The regulator emphasized that it would not tolerate such negligence, which threatens the integrity of financial markets. The fine is intended to send a strong message to other financial institutions about the necessity of robust compliance systems and adherence to regulatory standards.

In response, Coinbase acknowledged the FCA’s findings and reaffirmed its commitment to regulatory compliance. “CBPL continues to actively enhance its control systems to meet regulatory requirements. The FCA also recognized CBPL’s cooperation in its investigation,” the exchange stated, according to a CNBC report.

CBPL clarified that it had “unintentionally onboarded” some high-risk customers between October 30, 2020, and October 1, 2023. These customers accounted for just 0.34% of the total new customers signed up during this period. Additionally, Coinbase stressed that it takes the FCA’s findings and overall regulatory compliance very seriously.

Hence, the exchange is working to improve its control mechanisms to avoid future breaches. The news of the fine had an immediate impact on the crypto exchange’s stock. The COIN stock was down 1.94% at $240.31 in the U.S. premarket trading session on Thursday, July 25.

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