The U.S. crypto exchange Coinbase reached a $100 million settlement with New York regulators to resolve an investigation that found the company was “vulnerable to serious criminal conduct,” according to a press release published Wednesday.
New York Superintendent of Financial Services Adrienne A. Harris announced in the press release that Coinbase will pay a $50 million penalty to New York for violating virtual currency, money transmitter, transaction monitoring and cybersecurity regulations. These violations made the platform susceptible to fraud, possible money laundering, suspected activity related to child sexual abuse material and potential narcotics trafficking, according to the release.
Coinbase will also invest an additional $50 million to improve its compliance program as a part of the settlement.
“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth,” Harris stated in the release. “That failure exposed the Coinbase platform to potential criminal activity requiring the Department to take immediate action including the installation of an Independent Monitor.”
The release states that Coinbase “failed to conduct due diligence” within its Bank Secrecy Act/Anti-Money Laundering program and that it failed to keep ahead of the alerts triggered by its Transaction Monitoring System. This led to a backlog of more than 100,000 alerts in the monitoring system, meaning Coinbase failed to “timely investigate and report suspicious activity as required by law,” according to the release.
Coinbase was among a number of cryptocurrency exchanges that surged in popularity during the pandemic, but it announced in June that it would lay off 18 percent of its workforce due to plummeting cryptocurrency prices amid an economic slowdown.
Coinbase released a statement on its website saying it was fully cooperating with the New York regulators’ investigation and that the company invested in compliance improvements over the last two years, including enhancing its transaction monitoring system, developing a customer risk scoring system and updating its travel rule technology.
“We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space — for ourselves and others,” the statement reads.
“We believe that New York — and the broader industry — needs more crypto players committed to compliance and working with regulators,” the statement added. “That is one of the reasons why we knew it was important to bring this matter to a conclusion, even though it is never the type of agreement reached lightly.”
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January 05, 2023 at 12:33AM
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Coinbase paying $100M in settlement with New York regulators - The Hill
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