Coinbase hit with $50m fine for “significant” compliance failures
New York State’s Department of Financial Services (DFS) has slapped crypto exchange platform Coinbase with a $50 million penalty for “significant” compliance failures.
The firm has also been ordered to invest an additional $50 million into its compliance programme over the next two years.
Following an investigation, DFS found that Coinbase’s Bank Secrecy Act/Anti-Money Laundering programme – including its know your customer/customer due diligence (KYC/CDD), transaction monitoring system (TMS), suspicious activity reporting, and sanctions compliance systems – were “inadequate for a financial services provider of Coinbase’s size and complexity”.
The agency claims these failures made Coinbase vulnerable to “serious criminal conduct”, including fraud, money laundering, suspected child sexual abuse material-related activity and potential narcotics trafficking.
DFS superintendent of financial services Adrienne Harris says Coinbase failed to build and maintain a functional compliance programme that could keep pace with its growth.
The department says Coinbase was unable to keep up with the volume of alerts generated by its TMS and that by late 2021, Coinbase’s failure to keep pace with its alerts resulted in a “significant and growing backlog” of more than 100,000 unreviewed transaction monitoring alerts.
“That failure exposed the Coinbase platform to potential criminal activity requiring the department to take immediate action including the installation of an independent monitor,” Harris adds.