Central Bank Fines Coinbase Over €21 Million for Compliance Failures

The Central Bank of Ireland has imposed a fine of over €21 million on Coinbase Europe for significant breaches of its anti-money laundering and counter-terrorism financing obligations. The regulatory authority identified faults in Coinbase’s transaction monitoring system that resulted in more than 30 million transactions not being adequately monitored over a 12-month period.

According to the Central Bank, the unmonitored transactions represented a total value exceeding €176 billion, accounting for approximately 31 percent of all transactions processed by Coinbase Europe during that time. The regulator noted that it took the company almost three years to fully complete the monitoring of these transactions, which subsequently led to the filing of 2,708 Suspicious Transaction Reports (STRs) to the Financial Intelligence Unit for further investigation.

The STRs included suspicions of serious criminal activities, such as money laundering, fraud, drug trafficking, cyber-attacks involving malware and ransomware, and child sexual exploitation. Coinbase Europe has acknowledged its failure to meet transaction monitoring obligations, confirming it did not monitor 30,442,437 transactions properly and lacked adequate internal policies to detect and prevent money laundering and terrorist financing. The company also admitted it should have performed additional monitoring on 184,790 transactions.

Regulatory Settlement Details

The settlement between Coinbase and the Central Bank culminated in a fine totaling €30,663,906, which was reduced by 30 percent as part of the agreement, resulting in a final penalty of €21.6 million. Although Coinbase has accepted the sanctions, the settlement is pending confirmation by the High Court.

Colm Kincaid, the Deputy Governor of the Central Bank, emphasized the critical role that financial institutions play in combating financial crime. He stated, “To be effective in combatting financial crime, law enforcement agencies rely on regulated financial institutions to have systems in place to monitor transactions and report suspicions. The failure of such a system within any financial institution creates an opportunity for criminals to evade detection – and criminals will take that opportunity.”

Kincaid noted that the unique technological characteristics of cryptocurrency, along with its potential for anonymity and cross-border transactions, make it particularly appealing to criminals. He stressed the importance of robust controls within crypto services to identify and report suspicious transactions effectively.

“Where system failures do occur, it is imperative that they are reported to the Central Bank without delay so that appropriate actions can be taken to manage and mitigate the risk,” Kincaid added.

As the crypto landscape continues to evolve, regulatory bodies are increasingly scrutinizing compliance frameworks to ensure that financial institutions maintain the highest standards of transaction monitoring and reporting. The fine imposed on Coinbase Europe serves as a reminder of the ongoing challenges in the cryptocurrency sector regarding adherence to anti-money laundering and counter-terrorism financing regulations.