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Following the discovery of "serious failings" in Coinbase Inc.'s anti-money laundering compliance regime, New York's financial services regulator struck a settlement with Coinbase Inc., one of the largest cryptocurrency exchanges, for $100 million, the agency announced on Wednesday.
According to the agreement with the New York State Department of Financial Services, Coinbase must pay the state a $50 million fine. As part of the settlement, Coinbase, a California-based company with licenses in New York, would also put $50 million into bolstering its compliance program over the following two years.
DFS Superintendent Adrienne A. Harris stated in a statement that "it is essential that all financial institutions protect their systems from bad actors, and the department's expectations with respect to consumer protection, cybersecurity, and anti-money laundering programs are just as stringent for cryptocurrency companies as they are for traditional financial services institutions."
According to Harris, "Coinbase failed to develop and sustain a practical compliance program that could keep up with its expansion." Because of this breakdown, the Coinbase platform was potentially exposed to illegal conduct, necessitating rapid departmental action, including the installation of an independent monitor.
Following the failure of FTX Trading Ltd., lawmakers, regulators, and law enforcement are putting pressure on the cryptocurrency business, which led to Wednesday's settlement. The settlement with DFS, according to Coinbase, is an important step in its commitment to "continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space — for ourselves and others." Coinbase claims to have more than 108 million verified users and $101 billion in assets on its website.
In a statement released on Wednesday, Coinbase Chief Legal Officer Paul Grewal said the company has made significant improvements in relation to its past failings and "remains committed to being a leader and role model in the crypto space, including partnering with regulators when it comes to compliance."
We think we've invested more in compliance than any other cryptocurrency exchange in the world, and we want our users to feel secure using our services, Grewal added.
The consent order issued on Wednesday states that DFS examined Coinbase in 2020 for the time frame of July 1, 2018, through December 31, 2019, and discovered serious flaws in a number of compliance areas, including its customer due diligence procedures and its screening program for the Office of Foreign Assets Control of the U.S. Treasury Department. The department also discovered that since 2017, Coinbase had been conducting insufficient yearly anti-money laundering risk assessments.
According to the settlement order, the department compelled Coinbase to employ a third-party consultant to evaluate its compliance program and provide areas for improvement. As a result, Coinbase adopted a remediation plan to strengthen its compliance program.
According to the ruling, the agency launched an enforcement inquiry into the compliance problems identified during the 2020 exam in 2021. The examination revealed weaknesses in Coinbase's compliance and
