Photo credit: Samyukta Lakshmi/Bloomberg

The UK’s Financial Conduct Authority (FCA) has fined Coinbase subsidiary CB Payments 3.5 million pounds ($4.5 million) for breaches of anti-money (AML) regulations.

CB Payments (CPBL), which acts as a gateway for customers to trade crypto assets within Coinbase Group, allegedly violated a voluntary agreement made with the FCA in 2020, according to an FCA notice dated July 23. The agreement aimed to address concerns about the firm’s financial crime controls and prohibited CBPL from onboarding high-risk customers.

Despite this restriction, the CPBL provided services to over 13,400 high-risk customers, facilitating approximately $226 million in crypto-asset transactions. The FCA found that the entity’s controls were inadequate and that it failed to monitor compliance effectively, allowing the breaches to go unnoticed for nearly two years.

In a separate statement on July 25, Therese Chambers, joint executive director of enforcement and market oversight at the FCA, emphasized the need for firms involved in crypto trading to have robust financial crime controls and stressed that the FCA will not tolerate laxity in this area.

“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,” she said. “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 […] 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.”

Coinbase has stated that it welcomes regulation and is committed to working with regulators to ensure its platform is compliant and secure. The company also emphasized its investment in compliance and stated that its customers should feel safe and protected when using its platforms.

“We take the FCA’s findings and our broader regulatory compliance very seriously and CBPL continues to proactively enhance its controls to ensure compliance with its regulatory obligations,” Coinbase said in a blog post.

“We are always willing to acknowledge when we fall short, and to make improvements – which is what we have done here,” it added.