Crypto exchange Coinbase to pay $100 million for violating US anti-money laundering laws

Cryptocurrency exchange Coinbase will have to pay $100 million for violating U.S. anti-money laundering laws. $50 million of that amount is a fine, while the other half will be used to strengthen internal controls for compliance with the law.

According to the New York State Department of Financial Services (DFS), the violations that the crypto-exchange committed made it vulnerable to criminals and fraudsters who could potentially use it to launder money and distribute materials related to child sex abuse and drug trafficking.

The statement said: “Coinbase's KYC/CDD (Know Your Customer/Customer Due Diligence) program, both written and implemented, was immature and inadequate. Coinbase did not take customer intake requirements seriously enough and did not conduct normal due diligence.”

Coinbase could not keep up with the huge number of alerts generated by its Transaction Monitoring System (TMS). By the end of 2021, more than 100,000 warnings about possibly suspicious transactions went unchecked.

One of the consequences of the failure of Coinbase's Transaction Monitoring System was that because unexamined alerts languished for months in a waiting log, Coinbase regularly failed to investigate and report suspicious activity in a timely manner, as required by law.

A Department of Financial Services investigation found numerous examples where Suspicious Activity Reporting (SARs) were filed months after Coinbase first became aware of suspicious activity.

In July 2022, Coinbase Global was also investigated by the US Securities and Exchange Commission, which suspected the cryptocurrency exchange of allowing US citizens to trade digital assets unregistered as securities, contrary to US law.

After FTX went bankrupt, the cryptocurrency market has been in the spotlight of regulators around the world, and many experts expect that at least developed countries will introduce stricter regulation in this area in the coming years.