Photo of Coinbase in Suqian, Jiangsu Province, China on June 6, 2023 (Photo courtesy of Costfoto/NurPhoto via Getty Images)
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British regulators on Thursday fined Coinbase's British arm 3.5 million pounds ($4.5 million) for breaching a voluntary agreement aimed at preventing the cryptocurrency exchange from taking on “high-risk customers.”
Coinbase Global Shares fell nearly 2% in U.S. premarket trading.
CB Payments Limited (CBPL) is part of Coinbase Group, which operates a global cryptocurrency trading platform.
In October 2020, CBPL signed a voluntary agreement with the UK Financial Conduct Authority (FCA), accepting restrictions that prohibit it from accepting new customers that the regulator considers high risk. It also prohibits CBPL from providing services to these customers.
However, the FCA said CBPL breached the agreement by servicing 13,416 so-called high-risk customers. About 31% of them deposited about $24.9 million, the British regulator added. The funds were used to make withdrawals and execute crypto trades through other Coinbase entities, totaling approximately $226 million.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “There are significant deficiencies in CBPL's controls and the FCA has advised them so, which is why these requirements are required. However, CPBL has repeatedly breached these requirements.”
“This increases the risk that criminals will use CBPL to launder the proceeds of crime. We will not tolerate this laxity, which jeopardizes the integrity of our markets.”
Coinbase said in a statement that it takes the FCA's findings and its “broader regulatory compliance” very seriously.
It added: “CBPL continues to proactively strengthen controls to ensure compliance with its regulatory obligations. The FCA acknowledged this in its notice and CBPL's cooperation with its investigation.”
CBPL said it “inadvertently onboarded” a number of customers classified as high-risk between October 30, 2020 and October 1, 2023, accounting for 0.34% of the total new customer signings in the unit.