FCA Penalizes Coinbase's CBPL £3.5 Million for Violating High-Risk Customer Restrictions

CB Payments Limited (CBPL) has been fined £3,503,546 by the Financial Conduct Authority (FCA) for breaching a regulatory requirement. The fine is a result of CBPL's failure to comply with a rule that prevented it from offering services to high-risk customers.

CBPL, part of the Coinbase Group, operates a global cryptoasset trading platform. While CBPL itself does not handle cryptoasset transactions, it facilitates customer access to these transactions through other Coinbase Group entities. The firm is not registered for crypto asset activities in the UK.

CBPL Breaches High-Risk Limits

In October 2020, CBPL agreed to a voluntary requirement (VREQ) after discussions with the FCA. This requirement was imposed due to concerns about the effectiveness of CBPL’s financial crime control framework. The VREQ prohibited CBPL from onboarding new high-risk customers until it improved its control measures.

Despite this restriction, CBPL onboarded and provided e-money services to 13,416 high-risk customers. Approximately 31 percent of these customers deposited about USD $24.9 million. These funds were used for withdrawals and cryptoasset transactions through other entities in the Coinbase Group, totaling around USD $226 million.

We've fined CB Payments Ltd £3,503,546 for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers. #cryptoassets #CryptoTrading #FinancialRegulation https://t.co/etahpXO3q3

First FCA Fine under Regulations

The breaches occurred because CBPL did not properly design, test, implement, or monitor the controls necessary to ensure compliance with the VREQ.

The firm failed to account for all potential onboarding methods and did not adequately monitor compliance. As a result, repeated and significant breaches went undetected for nearly two years.

Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, stated: “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, which is why the requirements were imposed. However, CBPL 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 jeopardizes the integrity of our markets.”

This enforcement action marks the first use of the FCA's powers under the Electronic Money Regulations 2011. CBPL agreed to resolve the matter and received a 30% discount on the fine for doing so.