CB Payments Limited (CBPL) has been fined £3,503,546 by the
Financial Conduct Authority (FCA) for breaching a regulatory requirement. The
fine is a result of CBPL’s failure to comply with a rule that prevented it from
offering services to high-risk customers.
CBPL, part of the Coinbase Group, operates a global
cryptoasset trading platform. While CBPL itself does not handle cryptoasset
transactions, it facilitates customer access to these transactions through
other Coinbase Group entities. The firm is not registered for cryptoasset
activities in the UK.
CBPL Breaches High-Risk Limits
In October 2020, CBPL agreed to a voluntary requirement
(VREQ) after discussions with the FCA. This requirement was imposed due to
concerns about the effectiveness of CBPL’s financial crime control framework.
The VREQ prohibited CBPL from onboarding new high-risk customers until it
improved its control measures.
Despite this restriction, CBPL onboarded and provided
e-money services to 13,416 high-risk customers. Approximately 31 percent of
these customers deposited about USD $24.9 million. These funds were used for
withdrawals and cryptoasset transactions through other entities in the Coinbase
Group, totaling around USD $226 million.
First FCA Fine under Regulations
The breaches occurred because CBPL did not properly design,
test, implement, or monitor the controls necessary to ensure compliance with
the VREQ. The firm failed to account for all potential onboarding methods and
did not adequately monitor compliance. As a result, repeated and significant
breaches went undetected for nearly two years.
Therese Chambers, Joint Executive Director of Enforcement
and Market Oversight at the FCA, stated: “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.”
“CBPL’s
controls had significant weaknesses, which is why the requirements were
imposed. However, CBPL 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.”
This enforcement action marks the first use of the FCA’s
powers under the Electronic Money Regulations 2011. CBPL agreed to resolve the
matter and received a 30% discount on the fine for doing so.
This article was written by Tareq Sikder at www.financemagnates.com.
