Coinbase’s UK Arm Slapped with $4.5M Penalty Over High-Risk Customer Onboarding.

The Coinbase's UK arm, CB Payments Limited (CBPL), has been fined a significant $4.5 million (£3.5 million). The penalty followed an agreement breach that prohibited onboarding customers classified as "high-risk." Notably, the United Kingdom’s Financial Conduct Authority (FCA) announced the fine on Thursday, highlighting weaknesses in CBPL’s customer control mechanisms.

FCA Agreement With Coinbase’s UK Arm In 2020

In October 2020, Coinbase's UK arm signed a voluntary agreement with the Financial Conduct Authority (FCA). Per the agreement, CBPL consented to stop accepting new customers identified as "high-risk" by the regulator. In addition, the exchange agreed to cease providing services to these individuals.

The agreement aimed to curb money laundering and maintain the crypto market's integrity. However, contrary to the agreement, the FCA discovered that CBPL had onboarded and served about 13,416 “high-risk customers.”

Consequently, the FCA imposed a £3.5 million ($4.5 million) fine on the cryptocurrency exchange's UK subsidiary, underscoring the regulator's zero tolerance for such negligence. The strict stance aims to dissuade other financial institutions from breaking regulatory standards.

Therese Chambers Calls Out The CBPL Shortcomings

FCA’s joint executive director of enforcement and market oversight, Therese Chambers, waded into the agreement breach saga, criticizing the CBPL for its shortcomings. According to the director, CBPL's control had several weaknesses. The FCA identified the drawbacks and has set out requirements for the CBPL to navigate them.

However, the reverse has been the case, with many violations coming from the Coinbase’s UK arm trading platform. Furthermore, she pointed out the dangers of poor compliance, including the increased risk of criminal and other illegal activities within CBPL.

CBPL Reacts

In response to the penalty, Coinbase acknowledged the FCA’s findings and pointed out that it remains committed to ensuring compliance with regulatory demands. Furthermore, CBPL clarified that it had not intentionally onboarded “high-risk” customers. Therefore, it is actively working to ensure the breach doesn't repeat itself. Noteworthily, the trading platform stated that the so-called "high-risk" customers contributed only 0.34% of the exchange's customer pool.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence before making any trading or investment decisions.

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