Coinbase Global Inc., a U.S. cryptocurrency exchange, settled with New York state regulators for $100 million after an investigation into the exchange's compliance with requirements to prevent money laundering.
The regulators fined CoinBase $50 million after they said that as far back as 2018, the firm allowed customers to open accounts without conducting sufficient background checks. CoinBase must also spend $50 million to boost compliance efforts to stop potential criminals from using the exchange.
- Cryptocurrency exchange Coinbase is required to spend $100 million to settle background-check charges and improve compliance efforts.
- New York Department of Financial Services (DFS) regulators found compliance issues at Coinbase dating back to 2018.
- Coinbase must work with a monitor for at least another year to improve its compliance procedures, as part of the settlement.
" Coinbase has taken substantial measures to address these historical shortcomings," Paul Grewal, Coinbase's chief legal officer, told CoinDesk in an email. He said the firm is committed to being a role model and will work with regulators on compliance issues."
Compliance Issues Date Back to 2018
Regulators state first detected the compliance problems at Coinbase in 2020, after the exchange obtained a New York license in 2017. According to their findings, the exchange's anti-money-laundering controls had problems dating back to 2018.
“We found failures that really warranted putting in place an independent monitor rather than wait for a settlement,” said Adrienne A. Harris, New York state superintendent of financial services. “We have been very outspoken about illicit financing concerns in the space. It is why our framework holds crypto companies to the same standard as for banks.”
According to the settlement, Coinbase is moving too slowly in reviewing older accounts for suspicious features. It will require the exchange to work with a monitor for at least another year to improve its compliance procedures. New York regulators didn't identify the monitor.
Agencies Warn Risks of Crypto
Federal prosecutors have been busy in recent months with probes of several cryptocurrency exchanges and have also examined whether overseas firms are properly screening customers' backgrounds. Yesterday, regulators warned banks that they should know about risks tied to cryptocurrency assets, including legal uncertainties and misleading disclosures, two months after the collapse of FTX sent shockwaves through the industry.
The Bottom Line
U.S. authorities are investigating potential anti-money-laundering violations by Binance, the world’s largest crypto trading exchange. Until the fall of 2021, Binance allowed customers to open accounts below a certain dollar amount without undergoing rigorous identity verification. FTX was also being investigated for failing to follow anti-money-laundering rules at the time of its collapse in November. Prosecutors say disgraced FTX founder and former CEO Sam Bankman-Fried oversaw a scheme to misappropriate billions of dollars in customer deposits at FTX.