Coinbase UK unit fined $4.5 million by UK regulator for breaching privacy of ‘high-risk’ customers

British regulators fined Coinbase’s U.K. branch £3.5 million ($4.5 million) on Thursday for breaching a voluntary agreement designed to prevent the cryptocurrency exchange from taking on “high-risk customers.”

Coinbase Global Shares fell just under 2% in pre-market trading in the United States.

CB Payments Limited (CBPL) is part of Coinbase Group, which operates a global cryptocurrency exchange platform.

In October 2020, CBPL entered into a voluntary agreement with the UK Financial Conduct Authority (FCA), accepting restrictions that prevent CBPL from taking on new customers that the regulator considers to be high-risk. The regulator also prohibits CBPL from providing services to these customers.

However, CBPL breached the agreement and onboarded and served 13,416 so-called high-risk customers, the FCA said. About 31% of those people deposited about $24.9 million, the British watchdog added. Those funds were used to withdraw money and make cryptocurrency transactions through other Coinbase entities, totaling about $226 million.

Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “CBPL’s controls had significant weaknesses and the FCA has said so, which is why these requirements were necessary. However, CPBL has repeatedly breached those requirements.”

“This increases the risk that criminals could use CBPL to launder criminal proceeds. We will not tolerate such laxity, as it jeopardizes the integrity of our markets.”

Coinbase said in a statement that it takes the FCA’s findings and the agency’s “broader regulatory compliance” very seriously.

“CBPL continues to proactively enhance its controls to ensure compliance with its regulatory obligations. In its announcement, the FCA acknowledged this as well as CBPL’s cooperation in its investigation,” the company added.

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