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Coinbase’s UK Unit Slapped With $4.5M Fine for Violating High-Risk Customer Ban

Summary:
Coinbase’s UK unit – CB Payments Limited (CBPL) – was fined .5 million by the UK financial regulatory agency, the Financial Conduct Authority (FCA), for repeatedly violating a requirement that barred the firm from providing services to high-risk customers. While CBPL itself does not handle crypto transactions for customers, it serves as a “gateway” for trading through other entities within the Coinbase Group. However, CBPL is not currently registered to conduct crypto activities in the UK. Breaching Crypto Trading Restrictions In October 2020, following significant engagement with the FCA over concerns regarding the effectiveness of CBPL’s financial crime control framework, the firm entered into a voluntary requirement (the VREQ). It restricted CBPL from onboarding new

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Coinbase’s UK unit – CB Payments Limited (CBPL) – was fined $4.5 million by the UK financial regulatory agency, the Financial Conduct Authority (FCA), for repeatedly violating a requirement that barred the firm from providing services to high-risk customers.

While CBPL itself does not handle crypto transactions for customers, it serves as a “gateway” for trading through other entities within the Coinbase Group. However, CBPL is not currently registered to conduct crypto activities in the UK.

Breaching Crypto Trading Restrictions

In October 2020, following significant engagement with the FCA over concerns regarding the effectiveness of CBPL’s financial crime control framework, the firm entered into a voluntary requirement (the VREQ). It restricted CBPL from onboarding new high-risk customers until the framework issues were resolved.

Despite these restrictions, the financial regulator accused CBPL of onboarding as well as providing e-money services to 13,416 high-risk customers, according to the FCA’s official press release.

Around 31% of these customers deposited approximately $25 million. This amount was then used for withdrawals and to execute multiple crypto transactions through other Coinbase Group entities, totaling approximately $226 million.

The FCA reported that the breaches were a result of CBPL’s insufficient skill, care, and diligence in developing, testing, and overseeing controls designed to enforce the VREQ. This also included the failure to account for various customer onboarding scenarios.

The agency further highlighted that flaws in the initial monitoring allowed significant breaches to go unnoticed for nearly two years.

Weakness in CBPL’s controls

Commenting on the latest enforcement action against the Coinbase Group entity, Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA, said,

“The money laundering risks associated with crypto are obvious and firms must take them seriously. Firms like CBPL that enable crypto trading need to have strong financial crime controls. 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.”

Chambers also warned about the increased risk that criminals could leverage the platform to launder the proceeds of crime.

Meanwhile, this enforcement action was carried out under the Electronic Money Regulations 2011, marking the FCA’s first use of these powers for enforcement.

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