British regulators fined Coinbase's UK arm £3.5 million ($4.5 million) on Thursday for breaching a voluntary agreement designed to forestall the cryptocurrency exchange from accepting “high-risk customers.”
Coinbase Global The shares were down almost 2 percent in premarket trading within the US.
CB Payments Limited (CBPL) is a component of the Coinbase Group, which operates a world crypto trading platform.
In October 2020, CBPL entered right into a voluntary agreement with the UK Financial Conduct Authority (FCA) and accepted restrictions that prohibited the corporate from accepting latest clients that the regulator deemed high-risk and prohibited CBPL from offering services to those clients.
However, CBPL breached the agreement and took on and serviced 13,416 so-called high-risk customers, the FCA said. About 31% of those individuals deposited around $24.9 million, the UK regulator added. These funds were used to make withdrawals and conduct crypto transactions through other Coinbase firms, totaling around $226 million.
“CBPL's controls had significant weaknesses and the FCA told it this, which is why the requirements were necessary. However, CPBL repeatedly breached those requirements,” said Therese Chambers, deputy chief executive of enforcement and market oversight on the FCA.
“This increases the risk that criminals will use CBPL to launder proceeds of crime. We will not tolerate such negligence as it threatens the integrity of our markets.”
Coinbase said in a press release that it takes the FCA's findings and its “broader regulatory compliance very seriously.”
“CBPL continues to proactively enhance its controls to ensure compliance with its regulatory obligations. In its notice, the FCA acknowledged this and CBPL's cooperation in its investigation,” the corporate added.
CBPL said it had “inadvertently onboarded some customers” classified as high-risk between October 30, 2020 and October 1, 2023. This represented 0.34% of all latest customers acquired by the unit.
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