Technology
Thursday, July 25th, 2024 11:50 am EDT
Key Points
- FCA Fine and Breach Details: The U.K.’s Financial Conduct Authority (FCA) fined Coinbase’s U.K. arm, CB Payments Limited (CBPL), £3.5 million ($4.5 million) for breaching a voluntary agreement that restricted it from onboarding high-risk customers. Despite the agreement, CBPL onboarded and served 13,416 high-risk customers, who deposited approximately $24.9 million and conducted transactions totaling $226 million.
- Impact on Coinbase Shares: Following the announcement of the fine, Coinbase Global shares dropped nearly 2% in U.S. premarket trading, reflecting investor concerns over the regulatory breach and its implications.
- Coinbase’s Response and Compliance Measures: Coinbase acknowledged the FCA’s findings and emphasized its commitment to regulatory compliance. CBPL stated that it has been enhancing its controls to meet regulatory obligations and noted that the FCA recognized its cooperation during the investigation. CBPL attributed the onboarding of high-risk customers to unintentional actions, representing 0.34% of new customers between October 2020 and October 2023.
British regulators have fined Coinbase’s U.K. arm, CB Payments Limited (CBPL), £3.5 million ($4.5 million) for breaching a voluntary agreement intended to prevent the cryptocurrency exchange from onboarding high-risk customers. This regulatory action has had an immediate financial impact, with Coinbase Global shares dropping nearly 2% in U.S. premarket trading.
In October 2020, CBPL entered into an agreement with the U.K.’s Financial Conduct Authority (FCA), which imposed restrictions preventing the firm from taking on new customers deemed high-risk by the regulator. The agreement also barred CBPL from offering services to these high-risk customers. Despite these conditions, CBPL breached the agreement by onboarding and serving 13,416 high-risk customers. The FCA noted that approximately 31% of these customers deposited around $24.9 million, which was then used for withdrawals and crypto transactions through other Coinbase entities, totaling approximately $226 million.
The FCA criticized CBPL’s control mechanisms, describing them as having “significant weaknesses.” According to Therese Chambers, joint executive director of enforcement and market oversight at the FCA, these deficiencies necessitated the initial restrictions. Chambers emphasized that CBPL repeatedly violated these requirements, thereby increasing the risk of criminals using CBPL to launder illicit proceeds. The FCA underscored its zero-tolerance policy towards such laxity, which it believes undermines the integrity of financial markets.
In response, Coinbase issued a statement acknowledging the FCA’s findings and underscoring the seriousness with which it regards regulatory compliance. The company highlighted that CBPL is actively working to enhance its controls to ensure adherence to regulatory obligations. The FCA’s notice also acknowledged CBPL’s cooperation during the investigation.
CBPL clarified that the onboarding of high-risk customers was unintentional and occurred between October 30, 2020, and October 1, 2023, accounting for just 0.34% of the new customers signed up during that period. This fine and the regulatory scrutiny underscore the challenges and risks faced by cryptocurrency platforms in maintaining compliance with evolving financial regulations. The incident reflects broader concerns within the regulatory community about the potential for cryptocurrency exchanges to be exploited for money laundering and other financial crimes. As a result, firms like Coinbase are under increasing pressure to implement robust compliance measures to prevent such abuses and maintain market integrity.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/25/coinbase-uk-unit-fined-4point5-million-by-british-regulator-over-high-risk-customer-breaches.html
