A firm enabling cryptoasset trading has been fined more than £3mn by the Financial Conduct Authority for "repeatedly breaching" rules.
CB Payments Limited, part of the Coinbase Group, was served the £3,503,546 fine for breaking a rule that prevented it from offering services to high-risk customers.
The firm does not undertake cryptoasset transactions but acts as a gateway for customers to trade cryptoassets via other entities within the Coinbase Group.
It is not currently registered to undertake cryptoasset activities in the UK. The firm entered into a voluntary requirement in October 2020, after the FCA raised concerns about the effectiveness of CBPL’s financial crime control framework.
This prevented it from taking on high-risk customers while it addressed the issues.
Despite this, it onboarded and/or provided e-money services to 13,416 high-risk customers.
Around 31 per cent of these customers deposited around $24.9mn (£19.3mn) which were used to make withdrawals and then execute multiple cryptoasset transactions via other Coinbase Group companies, totalling approximately $226mn (£175.6mn).
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “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 and the FCA told it so, which is why the requirements were needed. CPBL, however, 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 jeopardises the integrity of our markets."
The FCA said the breaches were the result of the company's lack of "due skill, care and diligence" in the design, testing and implementation of controls put in place.
This included failing to consider all of the various ways in which customers might be onboarded when designing the controls.
Because of inadequacies in the initial monitoring of compliance with the VREQ, repeated and material breaches went undiscovered for almost two years.
The case marked the first time the FCA has taken enforcement action using its powers under the Electronic Money Regulations 2011.
The firm agreed to resolve the matter and qualified for a 30 per cent discount on the fine.
tara.o'connor@ft.com
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