Coinbase’s U.K. subsidiary, C.B. Payments Limited (CBPL), has been fined £3.5 million by the Financial Conduct Authority (FCA) for “repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers.”
According to the FCA, despite a voluntary agreement with it to limit the onboarding of high-risk customers, CBPL breached this agreement by onboarding and serving over 13,400 high-risk clients. The regulator claimed that more than 30% of these customers deposited nearly $25 million, which was used for withdrawals and crypto transactions, amounting to approximately $226 million.
CBPL serves as a gateway for customers to trade crypto through other Coinbase entities and is not licensed to conduct crypto transactions for users, according to FCA. The regulator, however, stated these regulatory breaches resulted from a lack of due skill, care, and diligence in designing, testing, implementing, and monitoring controls. These compliance failures went undiscovered for almost two years.
Meanwhile, Coinbase has responded by clarifying that only 0.34% of customers onboarded by CBPL were classified as high-risk and were unintentionally onboarded between October 30, 2020, and October 1, 2023. The company stated,
“We are always willing to acknowledge when we fall short and to make improvements – which is what we have done here.”
The regulator noted in its announcement that Coinbase has agreed to resolve the matter and qualified for a 30% discount on its fine.
This news comes amid Coinbase’s legal challenges in the U.S. The exchange recently filed a lawsuit against two U.S. federal agencies, the Securities and Exchange Commission (SEC) and Federal Deposit Insurance Corporation (FDIC), for allegedly failing to comply with its Freedom of Information Act (FOIA) requests.
The complaint, filed on June 27, 2024, at the U.S. District Court of Columbia, accuses the federal watchdogs of attempting to exclude the cryptocurrency industry from the banking sector. It also alleges that the SEC has failed to provide a clear and consistent stance on applying securities laws to the crypto market.
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