The Financial Conduct Authority (FCA) has fined the UK arm of global cryptoasset trading platform Coinbase more than £3.5m for anti-money laundering (AML) failings in its first enforcement action under the Electronic Money Regulations Act 2011.
CB Payments Limited (CBPL) was fined £3,503,546 at the end of July for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers.
CBPL is an authorised electronic money institution (AEMI), with permission to issue electronic money and provide payment services. It is part of the Coinbase Group, which operates a prominent cryptoasset trading platform accessible globally.
Although CBPL does not undertake cryptoasset transactions for customers, it enables customers to deposit fiat currency into e-money wallets which can then be used to purchase and exchange cryptoassets via other entities within the Coinbase Group.
Crytopassets are particularly susceptible to money laundering, as they provide an immediate, low-cost, anonymous way to transfer value across borders.
CBPL is not currently registered to undertake cryptoasset activities in the UK.
The FCA first identified potential weaknesses and gaps in CBPL’s financial crime control framework in February 2020.
As a result of this, the Authority decided that CBPL’s business should be restricted to prevent high-risk customers accessing its e-money and payment services while the firm remediated its financial crime controls.
CBPL entered into a voluntary requirement (VREQ) in October 2020, following significant engagement with the FCA relating to concerns about the effectiveness of CBPL’s financial crime control framework.
The VREQ prevented CBPL from taking on new high-risk customers while it addressed issues with its framework.
However, between 31 October 2020 and 1 October 2023, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers. Approximately 31 per cent of these customers deposited around USD $24.9 million.
These funds were used to make withdrawals and then execute multiple cryptoasset transactions via other Coinbase Group entities, totalling approximately USD $226 million.
The FCA said the breaches were the result of CBPL’s “lack of due skill, care and diligence in the design, testing, implementation and monitoring of the controls put in place to ensure that the VREQ was effective”.
Read the full final enforcement notice from the FCA to CBPL here.
The fine represents the first instance of FCA enforcement under the Electronic Money Regulations Act 2011.
Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA said: “The money laundering risks associated with crypto are obvious and firms must take them seriously. 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.”
As CBPL agreed to resolve the issue, the firm qualified for a 30% discount under the FCA’s executive settlement procedures. Without the discount, CBPL would have faced a financial penalty of £5m.
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