Coinbase and a New York regulator reach a $100 million settlement

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After looking into Coinbase’s compliance program, the New York State Department of Financial Services, or NYDFS, has come to an agreement with the company.

In response to violations of New York’s financial services and banking laws, Coinbase will pay a $50 million fine, according to a Jan. 4 announcement from the NYDFS, and invest an additional $50 million to improve its compliance program. The cryptocurrency exchange allegedly had numerous compliance “deficiencies” in relation to AML regulations, according to the financial regulator. The NYDFS reported problems with Coinbase’s user onboarding and transaction monitoring procedures.

The NYDFS stated that Coinbase “has acknowledged its failures in this regard to the Department.” “In addition, Coinbase has been aware of some of these problems since at least 2018, when they were identified through both internal and external reviews, including investigations by the Department. Although Coinbase has worked to address these problems, its progress has been slow; work is still unfinished in some areas and progress has only recently been made in others.

According to New York regulators, Coinbase violated the state’s licensing regime’s AML requirements by allowing customers to open accounts without conducting adequate background checks. The regulator cited a backlog of more than 100,000 alerts in claiming that the increase in users at the cryptocurrency exchange had contributed to a “failure to keep pace” with monitoring suspicious transactions.

Paul Grewal, chief legal officer at Coinbase, said, “We’re proud of our commitment to compliance, but we are also willing to acknowledge where we have fallen short, including by paying penalties & working hard to fix issues.

Since 2015, the NYDFS has mandated that cryptocurrency businesses obtain a BitLicense in order to function in the state. In 2017, Coinbase first received a license. Since the program’s inception, policymakers have imposed a variety of requirements on the cryptocurrency exchange and other parties covered by the regulatory framework, including annual assessment fees and calls to end the program entirely.

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