Coinbase to Pay £3.5 Million Fine To FCA Over High-Risk Customers
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Major cryptocurrency exchange Coinbase UK has been fined £3.5 million by the Financial Conduct Authority (FCA). According to the regulators, the crypto exchange was fined for refusing to adhere to a voluntary agreement not to onboard “high-risk customers”.
Coinbase’s CB Payments Limited (CBPL) acts as a medium for clients to make transactions on the platform, even though it doesn’t offer crypto transactions directly.
In 2020, following issues about the exchange’s framework for financial crime control, the regulator signed a voluntary agreement that prohibited it from accepting high-risk customers. But the FCA says the regulator violated that agreement and onboarded a worrisome number of high-risk customers.
Coinbase UK Onboarded 13,416 High-Risk Investors
The FCA stated that there were some lapses in the CBPL’s control system, which violated the voluntary agreement in October 2020. The agreement did not allow the crypto exchange to offer services to existing customers. However, the new customers who are not high-risk were not affected.
The regulator found out that the crypto exchange contravened the restrictions and allowed 13,416 high-risk investors into its platform.
Coinbase agreed that the findings of the regulator are founded on facts. 30% of these customers deposited $24.9 million. They deposited and withdrew the amount before making crypto transactions through other Coinbase platforms, totaling about $226 million.
The FCA stated that the violations were due to the lack of expertise on the part of the CBPL. The regulator also faulted the exchange for lack of due diligence while designing, testing, and implementing the measures put in place to guarantee an effective voluntary requirement.
FCA Says It’s Focused On Protecting The Market
FCA’s Joint Executive Director of Enforcement and Market Oversight, Therese Chambers, commented on the development.
She stated that cryptocurrency transactions pose high money laundering risks and companies need to be serious about combating them. Therese highlighted that companies that CBPL that deal in crypto trading should have robust financial control to prevent these risks.
However the firm’s measures were significantly weak, which can expose several customers to risks. As a result, the FCA had to make sure that CBPL followed the requirements.
Unfortunately, the firm breached these requirements. The breach has led to an increase in the risk of money laundering using the crypto exchange’s platform. Therese pointed out that the regulator will not accept such negligence, and the required punishment will be administered accordingly. She reiterated that the goal is to protect the finance market and make it safe for investors.
