Coinbase UK Arm Fined $3.5 million by UK regulator for flaunting the law

Coinbase has proven to us again that the company is a bit of a rule breaker. Coinbase isn't afraid to bend the rules and stretch the boundaries of what can or cannot be done. But this strategy is somewhat of a gamble. Sometimes it works, but sometimes, you get caught. And this time Coinbase was caught red handed by the UK authorities for making deals with "high risk customers."

It wasn't long ago that Coinbase had trouble with the authorities. Just last year, the company was fined by Dutch regulators for offering crypto services to customers in the Netherlands without registering there. When the company was sentenced to a fine, it denied all allegations and opted to appeal the verdict.

Recurring pattern here

It seems that there is a recurring pattern here. CoinBase seems to have little regard for the law. Why is this so? I imagine that the company prioritized profit over ethical conduct, doing whatever it takes for them to generate more profit even if it requires them to go beyond the boundaries of the law. I guess this is a gamble that Coinbase is willing to take, and I can see the strategy behind this tactic. If you think about it, could you image how much money they manage to generate doing all this shady business, and all the price they had to pay was 3 million dollars, which would be only a very small amount of profit of what they had amassed in that time. And whenever they were caught, they would just put on a show for the authorities and public, only to resume their under table business after everything has died down.

What was discovered from the investigation?

The FCA has fined Coinbase's subsidiary,CB Payments Ltd (CBPL), for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers. These would include people who are on sanction lists, politically exposed people and those who declared themselves unemployed. CBPL was ultimately fined 3.5 million pounds (SGD$6 million) after the company was given a lighter sentence for agreeing to resolve the case.

This crackdown from the FCA is unprecedented and never seen before, as the authorities usually focus more on banks and investment companies instead of Cryto asset firms. But despite all this, the FCA wasn't afraid to come down hard on one of the biggest crypto exchange companies like Coinbase.

Therese Chambers, the joint executive director of enforcement and market oversight at the FCA said" The money-laundering risks associated with crypto are obvious and firms must take them seriously. CBPL controls had "significant weaknesses" which "increased the risk that criminals could use CBPL to launder the proceeds of crime."

FCA has blamed it on the lack of due skills, care and diligence to stick to the regulatory standards which resulted in the company repeatedly allowing contentious customers to use its services in recent years. According to their records, CBPL has onboarded or provided its service to 13,416 high-risk customers.

Coinbase's response to the case

In response to the case, Coinbase acknowledged their shortcomings in their anti-money laundering controls and emphasized their commitment to improving regulatory compliance. Coinbase also wanted to highlight their clean track record by pointing out that those who have managed to flout the law only make up 34% of their customer user base over the past three years, and on a whole, they are still doing well at filtering out high-risk customers. CoinBase further assured the public that despite their negligence, the company emphasized their commitment to regulatory compliance.

Reconsolidating and planning for its next steps

But I doubt this strategy would work for long, with regulators hammering down on crypto companies and enforcing stronger regulations on these companies. I think this would prompt Coinbase to come out with a different strategy that could harvest the same effect while staying under the radar.