Coinbase UK Subsidiary to Pay $4.5 Million Penalty for Violating Anti-Money Laundering Rules
The UK Financial Conduct Authority (FCA) has fined Coinbase UK Limited, a subsidiary of the cryptocurrency exchange Coinbase, a total of £3.6 million (US$4.5 million) for serious shortcomings in its anti-money laundering (AML) and terrorist financing controls.
Background
According to the FCA, Coinbase UK failed to adequately risk assess and mitigate the risks of financial crime between December 2020 and July 2022. The FCA found that Coinbase UK’s AML systems and controls were not sufficiently robust to identify and prevent money laundering and terrorist financing risks.
Specific Violations
- Failing to conduct adequate due diligence on customers, including failing to obtain sufficient information about the source of their funds.
- Failing to monitor transactions adequately, including failing to identify suspicious transactions that could be indicative of money laundering or terrorist financing.
- Failing to have adequate systems and controls in place to manage the risks of financial crime, including failing to have a risk assessment in place that was appropriate for the business.
FCA’s Findings
In its final notice, the FCA stated that Coinbase UK’s failures exposed customers to the risk of being used for financial crime and undermined the integrity of the UK financial system.
The FCA also found that Coinbase UK failed to take appropriate steps to address the deficiencies in its AML systems and controls even after the FCA had raised concerns with the company.
Penalty
The £3.6 million penalty imposed by the FCA is a significant amount and reflects the serious nature of Coinbase UK’s violations. The penalty is intended to deter Coinbase UK and other financial institutions from committing similar offenses in the future.
Next Steps
Coinbase UK has agreed to pay the penalty and has also committed to taking a number of steps to improve its AML systems and controls.
The FCA will continue to monitor Coinbase UK’s progress and will take further action if necessary.
Conclusion
The FCA’s action against Coinbase UK is a reminder that financial institutions must have robust AML systems and controls in place to prevent money laundering and terrorist financing. Financial institutions must also be prepared to take appropriate steps to address any deficiencies in their AML systems and controls.
Kind regards
S. de Vries
