The Central Bank of Ireland is fining Coinbase Europe €21.4 million ($24.6m) for breaching anti-money laundering (AML) and counter terrorist transaction monitoring obligations between 2021 and 2025, the bank said Thursday in a press release.
Coinbase Europe has been charged over errors in configuring its transaction tracking system, which resulted in more than 30 million transactions not being properly tracked over a 12-month period, the central bank said.
The value of these transactions amounted to more than €176 billion ($203bn), and accounted for approximately 31% of all Coinbase Europe transactions carried out during the period when the errors existed, it said.
The Irish Central Bank went on to say that it took Coinbase Europe almost three years to fully complete the monitoring of the affected transactions. This subsequent monitoring led to the reporting of 2,708 suspicious transaction reports (STRs) with the National Financial Intelligence Unit for further review and potential investigation.
“To be effective in combating financial crime, law enforcement agencies rely on regulated financial institutions to have systems in place to monitor transactions and report suspicions.
The STRS submitted regarding the late monitoring of transactions contained suspicions related to serious criminal activities including: money laundering; fraud/scam; drug trafficking; cyber-attacks (malware/ransomware); and child sexual exploitation.
“Crypto has specific technological features that, along with the capabilities of enhancing anonymity and cross-border nature, make it especially attractive to criminals looking to move their funds. This is why it is especially important that companies that engage in crypto services have robust controls in place to identify and report suspicious transactions,” said Kincaid.
In June of this year, Coinbase has moved its regulatory base from Ireland to Luxembourg, where the exchange now holds a license under the European market in Crypto Assets (MICA) regime.
Coinbase is said to have encountered some friction with the Central Bank of Ireland (CBI), according to people familiar with the matter, though the exchange is not the only crypto firm to have encountered difficulties with the CBI, the people said.
Asked about the situation with the BOI in a recent interview, Coinbase’s VP of International Policy Tom Duff Gordon said there was no particular reason the exchange left Ireland for Luxembourg, which he pointed out has a relatively mature set of laws, especially around areas like tokenization.
Regarding the Irish Central Bank, Duff Gordon said:
“At the top of the bank, let’s just say that historically they didn’t necessarily see the kind of value of this industry. I think that’s changing, and I think it’s on a journey on the subject. If you look at the speeches that people have made that people have made in the last year and a half, I think now they’re becoming more positive about the evolution of this market. But they definitely tend to be on the more conservative side.”
In a response following the fineCoinbase says it has built a transaction monitoring system (TMS), which analyzes financial transactions to detect suspicious patterns or anomalies.
“In developing 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 are ignored by these scenarios. These coding errors do not affect other TMS scenarios that screen transactions, or Coinbase’s ancillary compliance controls.”
Coinbase Europe admits the prescribed objections and agrees to the undisputed facts as set forth in Notice of settlementsaid the CBI, which included the application of a 30% discount in the settlement scheme.
Update (Nov. 6, 13:45 UTC): Adding Coinbase comments to the transaction tracking system
