CB Payments Limited, a subsidiary of Coinbase Group, was fined over $4.5 million by the Financial Conduct Authority (FCA) for breaching regulations on offering services to high-risk customers.

The breaches were due to CB Payments Limited's inadequate monitoring of controls, discovered after almost two years by the Financial Conduct Authority.

Despite agreeing not to onboard new high-risk customers in 2020, CB Payments Limited served 13,416 high-risk customers, conducting transactions worth around $226 million.

CB Payments Limited agreed to resolve the issue and received a 30% discount on the fine.

Following the penalty announcement, Coinbase's stock experienced a nearly 2% decline.

Coinbase defended itself, stating it unintentionally onboarded a small fraction of high-risk customers between October 2020 and October 2023.

The $4.5 million fine reflects the Financial Conduct Authority's zero-tolerance approach towards regulatory violations affecting market integrity.

The Financial Conduct Authority's joint executive director criticized CB Payments Limited's controls as weak, leading to repeated breaches of requirements.

The Financial Conduct Authority found CB Payments Limited lacked diligence in designing, testing, and monitoring controls to meet regulatory requirements.

CB Payments Limited, authorized by the Financial Conduct Authority, serves as a gateway for customers to trade crypto within the Coinbase group but does not offer cryptocurrency services itself.

This enforcement action marks the first time the Financial Conduct Authority has acted under the Electronic Money Regulations 2011, targeting a cryptocurrency firm.

UK authorities, including the NCA and police, are enhancing capabilities to combat crypto-related crimes with expanded seizure and destruction powers.