The New York Department of Financial Services (NYDFS) has announced a consent order focused on certain historical shortcomings in Coinbase’s compliance programme, which includes a $50m penalty and a $50m commitment from Coinbase
US-based cryptocurrency exchange Coinbase has reached a $100m settlement with New York’s Department of Financial Services (NYDFS) to resolve shortcomings in its historical compliance programme.
The regulator said that its investigation has identified wide-ranging and long-standing failures in Coinbase’s Anti-Money Laundering (AML) programme between 2018 and 2021.
The programme includes know your customer (KYC), customer due diligence (CDD), transaction monitoring system (TMS), suspicious activity reporting, and sanctions compliance systems, among others.
NYDFS has issued a consent order which includes a $50m penalty, and Coinbase has agreed to pay $50m in compliance programme investments over the coming two years.
Coinbase stated: “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.
“We are always willing to acknowledge where we have fallen short and we welcome opportunities to improve our programmes.
“Today, we want to share a bit more about the investments we have made over the past two years to ensure we have strong, scalable compliance processes built for the long term.”
Coinbase has been licenced by the NYDFS to conduct a virtual currency business and money-transmitting business in New York since 2017.
The department has conducted an enforcement investigation, which concluded that Coinbase’s AML programme is inadequate for the size and complexity of the firm.
The compliance failure has breached the New York Banking Law and the NYDFS’ virtual currency, money transmitter, transaction monitoring, and cybersecurity regulations.
Also, the failures increased the risk of serious criminal conduct, including potential fraud, money laundering, child abuse, and narcotics trafficking, said NYDFS statement.
New York’s Department of Financial Services Superintendent Adrienne A Harris said: “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.
“Coinbase failed to build and maintain a functional compliance programme that could keep pace with its growth.
“That failure exposed the Coinbase platform to a potential criminal activity requiring the Department to take immediate action including the installation of an Independent Monitor.”
Coinbase said that it has been cooperating with the NYDFS for its investigation and it aims to build the world’s most trusted, compliant, and secure crypto exchange.