Coinbase condemned as part of the fight against money laundering

Coinbase, one of the leading cryptocurrency exchanges in the ecosystem, will have to pay $100 million for various compliance issues. It was pointed out that its registration process was considered too simple and the monitoring of suspicious transactions was questioned.

Lack of vigilance against money laundering

New York State has enacted drastic measures as the world calls for greater regulation of the cryptocurrency industry.

Coinbase, the world’s second-largest cryptocurrency exchange, has admitted paying $100 million for failing to require adequate anti-money laundering safeguards from its customers, a New York Times report confirms.

“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,” said New York DFS Superintendent Adrienne Harris.

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, the two parties announced on Wednesday.

The DFS investigation focused on the company’s compliance with rules aimed at preventing money laundering.

DFS found that Coinbase treated the issue of verifying customer information as a “simple checkbox” when customers arrived on the platform.

In a statement, DFS said the company has failed to conduct adequate background checks as cryptocurrencies are often criticized for being used for money laundering.

“Coinbase has admitted to the ministry its 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 reviews and external reviews. […]. Although Coinbase has been working 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 must be made

The company will also have to spend an additional $50 million over the next two years to improve its compliance with US laws governing the industry.

The agreement also requires Coinbase to engage a third party to monitor its compliance process. In fact, an independent monitor has been contacted by Coinbase to help bring it into compliance.

Depending on the agreement between the platform and NYDFS, that 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 unverified suspicious transactions at the end of 2021.

In addition to DFS, Coinbase is also under the control of the US securities police, the United States Securities and Exchange Commission (SEC). The company previously disclosed that it had 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 the trade are not subject to the same requirements as other financial institutions, whether in the United States or on the Old Continent, which are trying to change that.

The stock rose more than 10% at the Wall Street open on Wednesday.

New York State still requires industry players to obtain a license to practice, which allows authorities to exercise some oversight of the activity. In August last year, the Robinhood platform was also fined $30 million for violating money laundering rules.

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