Coinbase’s CBPL Fined $4.5M by UK Regulator for Lapses in Onboarding Controls

CORRECTOIN (July 25, 13:20 UTC): Corrects headline and first paragraph to say fine related to onboarding high-risk customers. An earlier version said the fine related to money launderings lapses.

CB Payments Ltd. (CBPL), an e-money institution and payments processor tied to crypto exchange Coinbase (COIN) was fined more than 3.5 million pounds ($4.5 million) by the Financial Conduct Authority (FCA) for lapses in controls designed to prevent onboarding of so-called high-risk customers.

The London-based company, which is authorized by FCA and doesn’t itself offer cryptocurrency services, acts as a gateway for customers to trade crypto on entities within the Coinbase group.

Concerns about the company’s controls over financial crime were raised in February 2020 after the FCA visited its offices, and CBPL then entered into a voluntary agreement that prevented it from taking on new high-risk customers while it addressed those issues.

“Despite the restrictions in place, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers,” the FCA said in a release on Thursday. “Approximately 31 per cent of these customers deposited around USD $24.9 million. These funds were used to make withdrawals and then execute multiple cryptoasset transactions via other Coinbase Group entities, totalling approximately USD $226 million.”

The breaches, which were not discovered for almost two years, resulted from CBPL’s lack of skill in monitoring the controls put in place to ensure that the agreement was effective, the FCA said.

“Coinbase remains committed to high standards of regulatory compliance, and this means partnering with regulators when it comes to compliance and other areas,” the company said in the blog post. “We are always willing to acknowledge when we fall short, and to make improvements – which is what we have done here.”