FCA Imposes Fine on Coinbase's Subsidiary

The UK Financial Conduct Authority (FCA) has fined CB Payments Ltd (CBPL), a subsidiary of the cryptocurrency exchange Coinbase, £3,503,546 for failing to adhere to financial crime control requirements. CBPL, authorized by the FCA as an e-money institution since 2017, is accused of repeatedly breaching conditions that were intended to prevent the firm from providing services to high-risk customers.

According to the FCA, CBPL does not conduct cryptoasset transactions directly but facilitates customer access to these transactions through other entities within the Coinbase Group. During a 2020 inspection, the FCA identified "significant weaknesses and gaps" in CBPL's financial crime control framework. Despite agreeing to a voluntary requirement (VREQ) to address these issues, CBPL continued to onboard high-risk customers.

The FCA's investigation found that between October 30, 2020, and October 1, 2023, CBPL had onboarded and/or provided e-money services to 13,416 high-risk customers. Approximately 31% of these customers deposited around $24.9 million, which was then used to execute cryptoasset transactions totaling approximately $226 million via other Coinbase Group entities.

Therese Chambers, the FCA's joint executive director of enforcement and market oversight, criticized CBPL's lack of effective financial crime controls, "Firms like CBPL that enable crypto trading need to have strong financial crime controls. CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed. CPBL, however, repeatedly breached those requirements. This increased the risk that criminals could use CBPL to launder the proceeds of crime. We will not tolerate such laxity, which jeopardises the integrity of our markets."

In response, Coinbase stated that CBPL is committed to enhancing its controls to comply with regulatory obligations. The exchange reiterated its dedication to high standards of regulatory compliance and its willingness to address any shortcomings.