Coinbase, a leading cryptocurrency exchange in the ecosystem, will have to pay $100 million for various compliance issues. Stressed, its registration process was deemed too simple and its tracking of suspicious transactions was questioned.
Lack of anti-money laundering supervision
New York State has introduced drastic measures as the world calls for more regulation of the cryptocurrency industry.
Coinbase, the second-largest cryptocurrency exchange in the world, has admitted to paying $100 million for failing to require its customers to provide adequate anti-money laundering guarantees, confirms a New York Times report.
“Coinbase has failed to build and maintain a functioning compliance program that could keep pace with its growth. This failure exposed the Coinbase platform to potential criminal activity,” said Adrienne Harris, superintendent of DFS New York.
US cryptocurrency exchange Coinbase has reached an agreement with New York’s Department of Financial Services (DFS) to pay $50 million (€47.1 million) to end the regulator’s investigation, both sides have announced Wednesday.
DFS’s investigation focused on the company’s compliance with anti-money laundering regulations.
DFS found that Coinbase treated the issue of verifying customer information as a “simple checkbox” when customers landed on the platform.
In a statement, DFS said the company failed to conduct proper background checks as cryptocurrencies are often targeted to be used for money laundering.
“Coinbase acknowledged the ministry’s shortcomings in this regard. Additionally, some of these issues have been known to Coinbase since at least 2018 and have been reported by both internal assessments and external audits. […]. While Coinbase has worked to correct these issues, its progress has been slow: progress in some areas has only occurred recently, and the work remains unfinished to this day. »
Efforts should be made
The company will also need to spend an additional $50 million over the next two years to improve its compliance with U.S. laws governing the industry.
The settlement also requires Coinbase to engage a third party to monitor its compliance process. In fact, Coinbase has contacted an independent monitor to help bring it into compliance.
Depending on the agreement between the platform and the NYDFS, such an entity may be required to continue doing business with Coinbase for an extended period of time.
The New York Department of Financial Services also reported that Coinbase had over 100,000 suspicious unverified transactions as of the end of 2021.
In addition to DFS, Coinbase is also under the control of the US Securities Police, the US Securities and Exchange Commission (SEC). The company previously disclosed that it received a subpoena and requests for documents and information from US stock market regulators.
Until a few months ago, the cryptocurrency market was poorly regulated. Companies entering trading are not subject to the same requirements as other financial institutions, both in the United States and in the Old Continent, which is trying to change that.
The stock was up more than 10% as Wall Street opened on Wednesday.
New York State still requires business operators to obtain a license to practice, which allows authorities to exercise some oversight of the business. In August last year, platform Robinhood was also fined $30 million for violating money laundering rules.