According to the Financial Times, this marks the FCA's first enforcement action against a company facilitating cryptocurrency transactions. Specifically, the FCA imposed the fine on Coinbase's subsidiary, CB Payments Ltd, for violating regulations that prohibited offering services to high-risk clients. This group includes individuals on sanctions lists, politically exposed persons, and those who are unemployed.
This fine is notable as it is the FCA's initial action against a cryptocurrency payment service provider, contrasting with the US Securities and Exchange Commission’s (SEC) more aggressive stance on digital asset companies. Recently, the SEC imposed a penalty exceeding USD 5 billion on the now-defunct crypto company Terraform Labs and its founder.
The FCA’s joint executive director for enforcement and market oversight highlighted that CB Payments Ltd's controls exhibited significant deficiencies, raising the risk of misuse by criminals. She also emphasised the importance of addressing money laundering risks in the crypto sector.
In October 2020, CB Payments Ltd agreed to a 'voluntary requirement' with the FCA due to concerns over its financial crime control measures, which included restrictions on serving high-risk clients. However, the FCA reported that CB Payments Ltd repeatedly failed to adhere to these restrictions over the subsequent three years. During this period, the subsidiary served 13,416 high-risk clients, with approximately 31% of these customers depositing around USD 24.9 million, which was subsequently used for withdrawals and transactions totalling approximately USD 226 million through other Coinbase entities.
Coinbase, an important player in the cryptocurrency exchange market, stated that it takes regulatory compliance seriously and acknowledged the need for improvement. The company also noted that high-risk individuals represented only 0.34% of its total customer base over the three-year period.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now