Regulation
Coinbase Fined $4.5M for ‘High-Risk’ Customers
Monetary base has been fined $4.5 million by a UK regulator for serving “high-risk” customers.
The fine, announced Thursday (July 25) at the Financial Conduct Authority (FCA), has been imposed on a subsidiary of cryptocurrency exchange CB Payments Limited (CBPL), which the FCA says has repeatedly breached a requirement that prevents the firm from doing business with high-risk customers.
“The money laundering risks associated with cryptocurrencies are clear and companies need to take them seriously,” Therese Roomsjoint executive director for enforcement and market oversight at the FCA, said in a press release.
“Companies like CBPL that allow cryptocurrency trading must have strong financial crime controls. CBPL’s controls had significant weaknesses and the FCA told them so, which is why the requirements were necessary. CPBL, however, has repeatedly breached those requirements.”
According to the FCA, CPBL agreed not to accept new high-risk clients in 2020, after the regulator raised concerns about the firm’s financial crime watchdog network.
However, despite this agreement, the FCA said, CBPL integrated and/or provided e-money services to 13,416 high-risk customers, who made multiple cryptocurrency transactions through other Coinbase group entities, for a total of approximately $226 million.
The FCA said CBPL had demonstrated a “lack of skill, care and diligence in the design, testing, implementation and monitoring” of its financial controls, with “repeated and material breaches” going undetected for almost two years.
“We take the FCA’s findings and our broader regulatory compliance very seriously and CBPL continues to proactively enhance its controls to ensure compliance with its regulatory obligations,” Coinbase said in a statement. declaration posted on his blog.
The FCA stresses that this action has been taken under the UK Electronic Money Regulations 2011 and represents the first time the regulator has taken enforcement action using these powers.
The fine arises from the need to clear regulatory frameworks remains one of the most pressing issues facing the cryptocurrency industry, as PYMNTS wrote earlier this month.
“Clear regulations can protect consumers, reduce fraud, and encourage institutional investment, while regulatory uncertainty or overly restrictive regulations can stifle innovation and hinder technological progress, lead to market instability, and push companies into more crypto-friendly jurisdictions,” the report reads.
The report added that the U.S. Securities and Exchange Commission (SEC) and other regulators are working cryptocurrency frameworkbut there is still substantial uncertainty, while Europe Cryptocurrency Markets (MiCA) regulation offers a more unified regulatory approach.
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