Coinbase Reaches $100M Settlement with NY Regulator for AML Failure

American cryptocurrency exchange, Coinbase, has agreed to pay $100 million settlement given lapses the New York Department of Financial Services (NYDFS) found in its anti-money laundering (AML), customer due diligence (CDD) and suspicious activity reporting systems.

This is as the state regulator said it found “significant failure” in the exchange’s compliance programme that resulted in the violation of the New York Banking Law and other regulations. NYDFS disclosed on Wednesday in a press statement that the exchange firm had agreed to pay a $50 million penalty to the State of New York and to also invest another $50 million in its compliance efforts over the next two years.

According to the state regulator, Coinbase’s compliance failures made the platform “vulnerable to serious criminal conduct, including, among other things, examples of fraud, possible money laundering , suspected child sexual abuse material-related activity, and potential narcotics trafficking.” The state watchdog further noted that Coinbase, which it licensed in 2017 to offer virtual currency and money transmitting business in the state, “failed to build and maintain a functional compliance programme that could keep pace with its growth.”

Check out this recent Finance Magnates London Summit 2022 chat with UK legislator Dr Lisa Cameron on cryptocurrency.

NYDFS said it found Coinbase’s AML, CDD and transaction monitoring system (TMS) to be “immature” as well as “inadequate” for a financial services provider of its size and complexity. “Coinbase treated customer onboarding requirements as a simple check-the-box exercise and failed to conduct appropriate due diligence,” the regulator noted.

As a result of Coinbase’s poor systems, NYDFS said TMS alerts were abandoned for months in the exchange’s backlog and were not investigated and reported promptly.

Meanwhile, the state regulator said Coinbase has begun to redress many of the identified lapses by building a more effective compliance framework under its supervision. NYDFS added that it has provided “an Independent Monitor to immediately evaluate the citation and begin working with Coinbase to fix the outstanding issues.”

American cryptocurrency exchange, Coinbase, has agreed to pay $100 million settlement given lapses the New York Department of Financial Services (NYDFS) found in its anti-money laundering (AML), customer due diligence (CDD) and suspicious activity reporting systems.

This is as the state regulator said it found “significant failure” in the exchange’s compliance programme that resulted in the violation of the New York Banking Law and other regulations. NYDFS disclosed on Wednesday in a press statement that the exchange firm had agreed to pay a $50 million penalty to the State of New York and to also invest another $50 million in its compliance efforts over the next two years.

According to the state regulator, Coinbase’s compliance failures made the platform “vulnerable to serious criminal conduct, including, among other things, examples of fraud, possible money laundering , suspected child sexual abuse material-related activity, and potential narcotics trafficking.” The state watchdog further noted that Coinbase, which it licensed in 2017 to offer virtual currency and money transmitting business in the state, “failed to build and maintain a functional compliance programme that could keep pace with its growth.”

Check out this recent Finance Magnates London Summit 2022 chat with UK legislator Dr Lisa Cameron on cryptocurrency.

NYDFS said it found Coinbase’s AML, CDD and transaction monitoring system (TMS) to be “immature” as well as “inadequate” for a financial services provider of its size and complexity. “Coinbase treated customer onboarding requirements as a simple check-the-box exercise and failed to conduct appropriate due diligence,” the regulator noted.

As a result of Coinbase’s poor systems, NYDFS said TMS alerts were abandoned for months in the exchange’s backlog and were not investigated and reported promptly.

Meanwhile, the state regulator said Coinbase has begun to redress many of the identified lapses by building a more effective compliance framework under its supervision. NYDFS added that it has provided “an Independent Monitor to immediately evaluate the citation and begin working with Coinbase to fix the outstanding issues.”