Coinbase Agrees to $100 Million Settlement With New York Financial Regulator for Anti-Money Laundering Violations

Coinbase has agreed to pay a $100 million settlement with the New York Department of Financial Services (NYDFS), according to a consent order signed by the NYDFS superintendent Adrienne Harris on Jan. 4, 2023. New York’s financial regulator said compliance problems were detected and the exchange’s anti-money laundering controls were inadequate from 2020 through 2021.

The crypto exchange and custodial firm Coinbase (Nasdaq: COIN) has agreed to a $100 million settlement with New York’s top financial regulator NYDFS for failing to enact proper anti-money laundering controls in 2020 and 2021. Coinbase has agreed to pay a $50 million fine and another $50 million will go towards applying necessary anti-money laundering (AML) background checks.

“Coinbase lacked sufficient personnel, resources, and tools needed to keep up with these alerts, and backlogs rapidly grew to unmanageable levels,” the consent order signed by superintendent Adrienne Harris details. “By the end of 2021, Coinbase had a backlog of unreviewed transaction monitoring alerts grew to more than 100,000 (many of which were months old), and the backlog of customers requiring enhanced due diligence exceeded 14,000.”

The compliance investigation started in 2020 and the alleged lack of background check controls started in 2018. Coinbase agreed at the time to hire an independent examiner to make sure AML and know-your-customer (KYC) guidelines were followed. However, compliance problems persisted and the New York regulator decided to take action in 2021. “We have been very outspoken about illicit financing concerns in the space. It is why our framework holds crypto companies to the same standard as for banks,” superintendent Harris said.

Meanwhile, Coinbase’s stock COIN jumped on the news rather than decline, as shares increased by 6.74% on Wednesday. Coinbase also responded to the settlement on its blog and it noted that it has “committed to $50 million in compliance program investments over the next two years.” The exchange’s blog post message about the NYDFS settlement continued:

We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space – for ourselves and others.

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