• Coinbase has agreed to a $100 million settlement with the New York Department of Financial Services for violating anti-money laundering regulations.
• The compliance investigation started in 2020 and Coinbase agreed to hire an independent examiner to make sure AML and know-your-customer (KYC) guidelines were followed.
• Coinbase is required to pay a $50 million fine and another $50 million will go towards applying necessary anti-money laundering background checks.
Coinbase, the crypto exchange and custodial firm, has agreed to a $100 million settlement with the New York Department of Financial Services (NYDFS) for failing to enact proper anti-money laundering (AML) controls in 2020 and 2021. According to a consent order signed by the NYDFS superintendent Adrienne Harris on Jan. 4, 2023, the exchange’s anti-money laundering controls were inadequate and compliance problems were detected.
The investigation into Coinbase began in 2020, when the company was found to be lacking sufficient personnel, resources, and tools needed to keep up with AML alerts. As a result, the backlog of unreviewed transaction monitoring alerts grew to more than 100,000, many of which were months old, and the backlog of customers requiring enhanced due diligence exceeded 14,000. In response, Coinbase agreed at the time to hire an independent examiner to make sure AML and know-your-customer (KYC) guidelines were followed. However, compliance problems persisted, leading the New York regulator to take action in 2021.
As a result of the settlement, Coinbase is required to pay a $50 million fine and another $50 million will go towards applying necessary anti-money laundering background checks. The New York regulator stated that “We have been very outspoken about illicit financing concerns in the crypto space and will continue to take decisive actions to make sure virtual asset businesses operate within the law.”
The settlement is an important step in ensuring that crypto exchanges comply with regulatory requirements. It is also a reminder that companies must take appropriate action to ensure compliance and prevent money laundering. This settlement reinforces the importance of AML compliance and should serve as a warning to other exchanges and custodial firms.