Coinbase’s CBPL and West Vancouver Real Estate Firm Experience Fine of $400+ for Ineffective Onboarding Checks and AML Controls

By Richard M. on July 30, 2024

The UK’s Financial Conduct Authority (FCA) imposed a fine of $4.5 million on Coinbase’s CB Payments LTD (CBPL) for not having strict onboarding protocols while offering service to high-risk customers. As per the FCA’s investigation, the company onboarded and/or provided electronic services to more than 13,000 high-risk entities despite having several regulatory restrictions in place.

CBPL is an e-money service provider that is directly tied to a famous crypto exchange, Coinbase. The UK-based platform is authorized by the country’s regulatory body and does not offer crypto services, yet acts as a gateway for clients to trade virtual currencies with the entities within the Coinbase group. However, the concerns about the CBPL’s controls over financial crimes were raised in February 2020 after the visit of the FCA to its offices, and then the company entered into a voluntary agreement with the FCA that mandated CBPL from facilitating new high-risk entities while the company is obliged to address and resolve the highlighted issues.

“Despite the restrictions in place, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers,” the FCA said in a release on Thursday. “Approximately 31% of these customers deposited around USD $24.9 million. These funds were used to make withdrawals and then execute multiple crypto asset transactions via other Coinbase Group entities, totaling approximately USD $226 million.”

However, the breaches were not discovered for almost two years and originated from the company’s lack of having robust monitoring controls, ensuring that the agreement with the FCA remains intact.

“Coinbase remains committed to high standards of regulatory compliance, and this means partnering with regulators when it comes to compliance and other areas,” the company said in the blog post. “We are always willing to acknowledge when we fall short, and to make improvements – which is what we have done here.”

Like CBPL, one of the real estate companies in West Vancouver has alleged to have violated the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) obligations. The financial authority has imposed a fine of $83,000 for failing to meet Anti-money Laundering (AML) and Counter-terrorist Financing (CTF) requirements.

Back in January, the financial watchdog levied an “administrative monetary penalty” against Masters Realty (2000) Ltd, while the details of the case were published on its official website on Tuesday.

According to the FINTRAC’s investigations, the company is alleged to have violated five key aspects of the country’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act, as well as its associated regulations. These five violations include failing to enforce its policies and procedures, assessing and documenting money laundering activity and terrorist financing risks, completing a “prescribed review” of its policies, and not having detailed information about its clients for identification purposes.

For these reasons a penalty of $83,655 was imposed on the company, and the regulatory authority says that the firm has paid it in full. However, the financial watchdog’s public notification about the case opening in a new tab highlights that the company had obligations in place to comply with rules, yet failed to consistently practice the certain requirements.

The firm failed to record the identification information of two of its customers who provided funds. Additionally, the investigation also highlighted another case in which the company failed to record the nature of a customer’s business while there was another dealing in which the client’s occupation information was insufficient and vague.

FINTRAC’s administrative monetary penalties “are meant to be non-punitive and are issued to encourage change in the non-compliant behavior of businesses,” the agency said in a news release Tuesday.

“Canada’s anti-money-laundering and anti-terrorist-financing regime is in place to protect the safety of Canadians and the security of Canada’s economy,” said Sarah Paquet, FINTRAC’s director and CEO, in the release.

“FINTRAC will continue to work with businesses to help them understand and comply with their obligations under the act. We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”

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