Coinbase UK Subsidiary Fined $4.5M for Breaching High-Risk Customer Agreement
Coinbase’s UK arm, CB Payments Limited (CBPL), has been fined £3.5 million ($4.5 million) by the Financial Conduct Authority (FCA) for breaching a voluntary agreement designed to prevent the onboarding of high-risk customers. This marks the first enforcement action taken by the FCA under the Electronic Money Regulations 2011, signaling potentially increased scrutiny for crypto-related businesses in the UK.
In October 2020, CBPL entered into a voluntary requirement (VREQ) with the FCA, agreeing to restrictions on onboarding new high-risk customers while addressing concerns about its financial crime control framework. Despite these measures, CBPL onboarded and provided e-money services to 13,416 high-risk customers between October 2020 and October 2023.
Approximately 31% of these customers deposited around $24.9 million, which was subsequently used for withdrawals and to execute multiple cryptoasset transactions via other Coinbase Group entities, totaling approximately $226 million. The FCA noted that these breaches went undiscovered for almost two years due to inadequate monitoring practices.
Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA, emphasized the seriousness of money laundering risks associated with crypto, stating, “CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed. CPBL, however, repeatedly breached those requirements.”
Coinbase acknowledged the FCA’s findings, stating that it takes regulatory compliance seriously and that CBPL continues to enhance its controls. The company clarified that the high-risk customers represented only 0.34% of those onboarded during the period in question and were “unintentionally” added.
This fine could signal the start of increased regulatory scrutiny for cryptocurrency exchanges in the UK. It may prompt platforms to seek more crypto-friendly jurisdictions or to significantly bolster their compliance measures to meet the FCA’s expectations.
