Coinbase Fined $50M by New York Financial Regulator for AML Failure

Coinbase, a leading cryptocurrency exchange based in the United States, agreed to pay a $50 million penalty to settle with New York Department of Financial Services (NYDFS) for its anti-money laundering (AML) failure and to invest an addition $50 million in compliance in the next two years.

Paul Grewal, Chief Legal Officer at Coinbase, wrote in a company post published on Wednesday: "We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space."

Coinbase secures its license from the state regulator in New York State in 2017, which allowed it to operate virtual currency and money transfer business in the region. In 2020, NYDFS declared Coinbase's compliance program inadequate, with the company treating customer onboarding requirements as a simple check-the-box exercise and a backlog of 100,000 unreviewed transactions, according to the department. Even though Coinbase agreed to hire an independent consultant, it was not sufficient to meet the agency's requirements.

During the investigation in 2021, the state watchdog found "significant failure" in the exchange's compliance programme that resulted in the violation of the New York Banking Law and other regulations. This compliance failures made the platform "vulnerable to serious criminal conduct, including, among other things, examples of fraud, possible money laundering, suspected child sexual abuse material-related activity, and potential narcotics trafficking."

NYDFS added that Coinbase has begun to redress many of the identified lapses by building a more effective compliance framework under its supervision.

It was not the first time for the exchange to pay for its organizational deficiencies. In November 2022, Germany's financial watchdog BaFin​ also ordered Coinbase to ensure it has effective risk management and internal controls in place.