Coinbase UK Faces Record £3.5M Fine for Financial Crime Breaches

• FCA fines Coinbase’s CBPL £3.5M for failing financial crime control compliance.
• CBPL breached FCA’s 2020 agreement, processing $25M for high-risk clients despite restrictions.
• FCA’s action signals crypto firms must enhance financial crime controls or face serious consequences.

The Financial Conduct Authority (FCA) has imposed a £3.5 million ($4.5 million) fine on CB Payments Limited (CBPL), a UK-based arm of the global Coinbase Group as per Reuters report. This penalty marks the first such sanction within the UK’s crypto assets sector, underscoring the stringent expectations for financial crime controls in the cryptocurrency space.

The fine stems from CBPL’s failure to adhere to a regulatory agreement made in October 2020. Following an FCA inspection, CBPL agreed to enhance its financial crime defenses. Specifically, the agreement mandated that CBPL could not onboard new high-risk customers until its deficiencies were rectified. 

Despite this, CBPL continued to accept and process transactions for over 13,000 high-risk clients, who deposited nearly $25 million into the platform. These funds were subsequently used for transactions totaling approximately $226 million across various Coinbase entities.

Significantly, the FCA’s investigation revealed that CBPL’s non-compliance with the regulatory agreement persisted for nearly two years. During this period, the company’s financial crime controls were repeatedly breached. The FCA had earlier pointed out critical weaknesses in CBPL’s controls, which were intended to prevent such incidents. Hence, the prolonged nature of these breaches highlights a severe lapse in adhering to agreed-upon compliance measures.

Coinbase has responded to the fine by emphasizing its commitment to regulatory compliance. The company stated its dedication to working closely with regulatory bodies like the FCA to maintain a secure and compliant trading platform. This response reflects a broader industry trend where crypto firms are increasingly acknowledging the need for rigorous financial crime prevention mechanisms.

Additionally, experts view this fine as a significant warning for other firms in the sector. According to Kate Gee, a crypto litigation lawyer, this is a clear signal that inadequate financial crime controls will attract intense scrutiny and potential enforcement actions. Companies in the crypto industry must now take heightened measures to ensure their operations align with regulatory requirements.