Ireland’s central bank has fined Coinbase Europe 21.4 million euros ($24.6 million) for breaching its anti-money laundering (AML) and terrorist financing monitoring obligations between 2021 and 2025, the bank said in a press release on Thursday.
Coinbase Europe has been fined due to errors in the configuration of its transaction monitoring system, which resulted in more than 30 million transactions not being properly monitored over a 12-month period, the central bank said.
The value of these transactions amounted to over €176 billion ($203 billion), and accounted for approximately 31% of all Coinbase Europe transactions executed during the period in which the errors existed, it said.
The Irish central bank went on to say that it took Coinbase Europe nearly three years to complete monitoring of the affected transactions. This subsequent monitoring led to the filing of 2,708 Suspicious Transaction Reports (STRs) with the National Financial Intelligence Unit for further analysis and possible investigation.
“To be effective in the fight against financial crime, law enforcement agencies rely on regulated financial institutions to have systems in place to monitor transactions and report suspicions. The failure of such a system within any financial institution creates an opportunity for criminals to evade detection – and criminals will take advantage of that opportunity,” Central Bank of Ireland Deputy Governor Colm Kincaid said in a statement.
The submitted STRs relating to the late monitoring of the transactions contained suspicions of serious criminal activities, including: money laundering; fraud/fraud; drug trafficking; cyber attacks (malware/ransomware); and sexual exploitation of children.
“Crypto has special technological features that, along with its anonymity-enhancing capabilities and cross-border nature, make it particularly attractive to criminals looking to move their funds. That’s why it’s especially important that companies involved in crypto services have robust controls in place to identify and report suspicious transactions,” Kincaid said.
In June this year, Coinbase moved its regulatory base from Ireland to Luxembourg, where the exchange now holds a license under Europe’s Markets for Crypto Assets (MiCA).
Coinbase is said to have run into some friction with the Central Bank of Ireland (CBI), according to people familiar with the matter, though the exchange was not the only crypto firm to run into difficulties with the CBI, the people said.
Asked about the situation with the BoI in a recent interview, Coinbase’s vice president of international policy, Tom Duff Gordon, said there was no one specific reason why the exchange left Ireland for Luxembourg, which he pointed out has a relatively mature set of laws, especially around areas like tokenization.
Regarding the Central Bank of Ireland, Duff Gordon said:
“At the top of the bank, let’s just say that historically they haven’t necessarily seen the value of this industry. However, I think that’s changing and I think they’ve been on a journey on the subject. If you look at the speeches that politicians have given over the last year and a half, I think they’re now becoming much more positive about this market versus the more conservative side.”
In a response following the fine, Coinbase said it had built a Transaction Monitoring System (TMS) that analyzes financial transactions to detect suspicious patterns or anomalies.
“In building this TMS system, Coinbase inadvertently made three coding errors that caused five of the 21 TMS scenarios to not fully screen all transactions in 2021 and 2022,” Coinbase said.
“For example, crypto addresses separated by special characters were overlooked by these scenarios. These coding errors did not affect the other TMS scenarios that screened transactions or Coinbase’s complementary compliance controls.”
Coinbase Europe has admitted the prescribed violations and has accepted the undisputed facts as stated in the settlement notice, the CBI said, which included the application of a 30% discount of the settlement scheme.
UPDATE (November 6, 13:45 UTC): Adding Coinbase comments to transaction monitoring system
