Coinbase forced to pay $100 million over compliance failures

Coinbase exchange to pay $100 million

Coinbaseone of the largest cryptocurrency exchanges in the world by volume traded, agreed on a financial sensitivity of 50 million dollars with the New York Department of Financial Services (NYDFS) regarding legal compliance services.

According to the NYDFS, Coinbase had many compliance gaps related to anti-money laundering requirements, in particular through its registration process for its customers (KYC) or in its system for monitoring transactions carried out on the exchange.

According to the NYDFS press release, Coinbase would not have really made efforts to solve various problems going back to 2018:

“Coinbase has acknowledged its shortcomings in this regard to the ministry. Additionally, some of these issues have been known to Coinbase since at least 2018 and have been reported by both internal ratings and external reviews. […]. While Coinbase has worked to correct these issues, its progress has been on loan: progress in some areas has only recently occurred, and work remains unfinished to this day. »

Thus, in order to put an end to the investigation carried out by the regulator, Coinbase is forced to pay it $50 million.

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$50 million more to comply

Beyond the 50 million dollars paid by Coinbase to the NYDFS in order to put an end to this long follow-up, the American cryptocurrency exchange will have to invest an additional $50 million to establish a compliance program for the next 2 years.

According to the superintendent of the financial regulator, Coinbase has so far not implemented the measures necessary to deal with the growth in its number of customers:

“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth. This failure exposed the Coinbase platform to potential criminal activity requiring the ministry to take immediate action, including installing an independent monitor. »

Indeed, an independent monitor has been put in touch with Coinbase in order to help the latter to comply. According to the agreement established between the exchange and the NYDFS, the entity could be required to continue its activity with Coinbase for an extended period.

The New York Financial Services Department has further advised that by the end of 2021, Coinbase had over 100,000 unexamined suspicious transactions.

” We have taken NYDFS concerns seriously and have taken significant steps to address these historic shortcomings, Coinbase replied in a blog post.

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Sources: Reuters, DFSNY