The UK’s Financial Conduct Authority (FCA) has levied a £3.5 million (approximately $4.5 million) fine against CB Payments Limited (CBPL), a Coinbase subsidiary operating in Britain. This marks the FCA’s first enforcement action against a company in the UK cryptoasset sector for breaching regulatory requirements aimed at combating financial crime.
What Went Wrong?
In October 2020, following an FCA visit, CBPL voluntarily agreed to enhance its financial crime controls, including measures to prevent money laundering. The agreement specifically prohibited the company from accepting new high-risk customers until these improvements were implemented. However, CBPL disregarded this restriction, onboarding over 13,000 high-risk customers who collectively deposited nearly $25 million and executed cryptoasset transactions worth approximately $226 million.
The FCA’s Response
Therese Chambers, Joint Executive Director of Enforcement at the FCA, criticized CBPL’s “significant weaknesses” in controls and emphasized that the company had been explicitly warned about these issues. The FCA views CBPL’s repeated breaches of the voluntary agreement, which went unnoticed for almost two years, as a serious matter.
Coinbase’s Response
Coinbase acknowledged the fine and expressed their commitment to working with regulators to ensure a compliant and secure platform for their customers. They stated, “We welcome regulation and are dedicated to working proactively and closely with the most sophisticated financial regulators in the world, including the FCA, to ensure we offer the most compliant, trusted and secure platform for our customers.”
The Broader Impact
Legal experts view this fine as a significant warning to other firms operating in the UK cryptoasset sector. It underscores the importance of robust financial crime controls and the need for strict adherence to regulatory requirements. Companies that fail to take these measures seriously will face scrutiny and enforcement action.
Key Takeaways:
- The FCA’s action against CBPL signals a stricter regulatory approach towards cryptoasset firms in the UK.
- Companies operating in this sector must prioritize financial crime controls and comply with regulatory agreements.
- This is a landmark case that could set a precedent for future enforcement actions in the UK cryptoasset industry.
