Coinbase UK Hit with $4.5M Fine for High-Risk Customer Onboarding
Coinbase's UK subsidiary, CBPL, has been fined $4.5 million for violating the FCA agreement, which prohibits the platform from onboarding high-risk customers.
The United Kingdom regulators have levied a $4.5 million (£3.5 million) fine on Coinbase's UK subsidiary, CB Payments Limited (CBPL).
A penalty is imposed for violating a voluntary agreement that is intended to prevent the onboarding of high-risk customers.
The U.K.'s Financial Conduct Authority (FCA) announced the fine on Thursday, attributing it to significant flaws in CBPL's control mechanisms.
Coinbase UK Arm Faces Major Penalty
In October 2020, Coinbase's UK branch, CBPL, entered into a voluntary agreement with the Financial Conduct Authority (FCA).
This arrangement prohibited CBPL from admitting new customers that the regulator had identified as “high-risk.”
Moreover, it prohibited the company from offering services to these high-risk individuals.
This agreement aims to mitigate the risk of money laundering and to preserve the integrity of the market.
Its objective was to prevent potentially illegal activities on the CBPL platform.
Despite these measures, the FCA discovered that CBPL had onboarded and served 13,416 “high-risk customers.”
Moreover, Therese Chambers, the FCA's joint executive director of enforcement and market oversight, vehemently criticized Coinbase's CBPL for its deficiencies.
“CBPL’s controls had major weaknesses, and the FCA had already pointed this out, which led to the implementation of these requirements. Nevertheless, CBPL continually violated these requirements,” Chambers remarked.
In addition, she highlighted that the poor compliance raised the risk of criminal activities, including money laundering, within CBPL.
These violations resulted in a £3.5 million ($4.5 million) fine being imposed by the FCA on CBPL.
CBPL Responds to Regulators
The regulator emphasized that it would not tolerate such negligence, which poses a threat to the integrity of financial markets.
The fine aims to send a clear message to other financial institutions about the importance of solid compliance procedures and adherence to regulatory standards.
Coinbase acknowledged the FCA's findings and reiterated its commitment to regulatory compliance in response.
“CBPL continues to actively enhance its control systems to meet regulatory requirements. The FCA also recognized CBPL’s cooperation in its investigation,” the exchange stated, according to a CNBC report.
CBPL clarified that it had “unintentionally onboarded” certain high-risk customers between October 30, 2020, and October 1, 2023.
During this period, these customers comprised just 0.34% of the total new customers who signed up.
Furthermore, Coinbase underlined its commitment to regulatory compliance and the FCA's findings.
Therefore, to prevent future breaches, the exchange is currently in the process of enhancing its control mechanisms.
The news of the fine had an immediate effect on the crypto exchange's stock.
In U.S. premarket trading on Thursday, July 25, the COIN stock was down 1.94% at $240.31.
