CB Payments Limited, the UK subsidiary of Coinbase, has been charged with a $4.5 million penalty by the Financial Conduct Authority (FCA) for violating a voluntary agreement that was intended to prevent the onboarding of high-risk customers.
The FCA and CBPL entered into a voluntary agreement in October 2020 to restrict the onboarding of new clients that the regulator deemed “high-risk.” The objective of this agreement was to mitigate potential illicit activity on the CBPL platform, thereby safeguarding market integrity and mitigating money laundering concerns.
The FCA determined that CBPL had violated the agreement by enrolling and servicing 13,416 high-risk clients, despite the existence of these safeguards. Therese Chambers, the joint executive director of enforcement and market surveillance for the FCA, criticized CBPL’s management for their apparent lack of control.
Chambers stated that the FCA had previously identified the substantial deficiencies in CBPL’s controls, which resulted in the FCA enforcing these regulations. Nevertheless, CBPL consistently violated these regulations.
CBPL’s criminal activity risk, including money laundering, was increased by these compliance deficiencies, as per the FCA’s inquiry findings. Consequently, the FCA imposed a $4.5 million fine to underscore its zero-tolerance policy regarding regulatory violations that threaten market integrity.
According to Kate Gee, a crypto litigation attorney at Signature Litigation, the initial sanction of its kind was intended to underscore the importance of financial crime management for companies.
Gee cautioned that organizations that fail to adhere to established operational constraints or fail to sufficiently safeguard themselves from financial criminality will be subject to scrutiny and enforcement action.
Coinbase’s stock suffered a significant decline as a result of the substantial penalties. Following the announcement, the company’s shares experienced a nearly 2% decline.
The price was $240.30 during premarket trading on Thursday, July 25. Coinbase expressed its dedication to regulatory compliance and acknowledged the infractions in response to the FCA’s findings. In a statement, Coinbase stated that CBPL is committed to constantly enhancing its control systems to meet legal requirements. The FCA also recognized CBPL’s investigative assistance.
The exchange clarified that just 0.3% of all new clients from October 30, 2020, to October 1, 2023 were high-risk, resulting in their onboarding being accidental. In response to the FCA’s conclusions, Coinbase reaffirmed its commitment to enhancing its control systems to prevent future attacks.
The crypto market and investors will be closely monitoring Coinbase’s efforts to address compliance concerns in order to determine how the company maintains its commitment to regulatory standards and improves its control systems.
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