Bitrabo Editorial
The UK subsidiary of Coinbase, CB Payments Limited, has been fined $4.5 million by the Financial Conduct Authority (FCA) for failing to adhere to a voluntary agreement aimed at preventing high-risk customers from being onboarded. The FCA discovered significant control system issues at CBPL.
Violation of Agreement
In October 2020, CBPL entered into a voluntary agreement with the FCA to restrict the onboarding of clients deemed as “high-risk” by the regulator. The purpose of this agreement was to mitigate potential criminal activities on the CBPL platform, thus upholding market integrity and reducing money laundering risks.
Despite these safeguards, the FCA identified that CBPL had breached the agreement by onboarding and servicing 13,416 high-risk clients. Therese Chambers, the FCA’s joint executive director of enforcement and market monitoring, criticized CBPL’s management for their inadequate control measures.
The FCA’s investigation revealed that these compliance deficiencies heightened CBPL’s exposure to criminal activities, including money laundering. Consequently, the FCA imposed a $4.5 million fine to underscore its strict stance against regulatory breaches that jeopardize market integrity.
Impact on Company Shares
The substantial fine had a negative impact on Coinbase’s stock performance, with shares declining by nearly 2% in response to the news.
During premarket trading on Thursday, July 25, the share price stood at $240.30.
CBPL’s Response
In light of the FCA’s findings, Coinbase expressed its commitment to regulatory compliance and acknowledged the violations. The company stated that CBPL is continuously enhancing its control systems to meet legal standards and noted the FCA’s recognition of CBPL’s investigative cooperation.
Coinbase clarified that only 0.3% of new clients between October 30, 2020, and October 1, 2023 were high-risk, emphasizing that their onboarding was unintentional. The company emphasized its seriousness regarding the FCA’s findings and ongoing efforts to strengthen control systems to prevent future breaches.
Investors and the cryptocurrency market will closely monitor Coinbase’s resolution of compliance issues to assess how the company upholds regulatory standards and improves its control mechanisms.
Featured image from Reddit, chart from TradingView