Coinbase Europe fined €21.5M by Irish central bank over monitoring failures

Coinbase Europe Limited (CBEL), the European affiliate of the US crypto exchange Coinbase, has reached a settlement with the Central Bank of Ireland for € 21.5 million ($24.7 million) due to technical faults in its transaction monitoring system between 2021 and 2022.

According to reports, Coinbase Europe has been fined due to faults that resulted in more than 30 million transactions not being properly monitored over 12 months.  

The value of these transactions amounted to over €176 billion, and accounted for approximately 31% of all Coinbase Europe transactions conducted in the period when the faults existed. Ireland’s central bank based its fine on Coinbase’s expected annual revenue of $480 million in Ireland from 2021 to 2024.

CBEL filed suspicious transaction reports on transactions worth $15 million

Coinbase Europe is part of the Coinbase Group. It provides crypto asset and wallet services to customers globally, facilitating their use of the Coinbase Group’s trading platform to buy and sell crypto assets.  

As a crypto asset service provider, Coinbase Europe is required to continuously monitor customer transactions.

To that end, Coinbase explained that it created TMS “scenarios,” which look for specific red flags or transaction patterns that may be suspicious. These instances trigger alerts, which a team of compliance professionals investigates further. CBEL used 21 TMS scenarios to monitor its clients’ transactions.

However, Coinbase made three coding errors. As a result, five of the 21 TMS situations did not fully verify all transactions within the two-year period. The situations ignored crypto addresses that were divided by special characters. The company stated that it identified the issue through internal testing, resolved it within weeks, and subsequently reviewed all affected transactions.

Coinbase Europe eventually filed around 2,700 suspicious transaction reports on transactions totaling roughly $15 million, out of the 185,000 transactions flagged during the review period. The company stated that these filings do not indicate wrongdoing but are required by Irish Anti-Money Laundering (AML) laws.

Registered companies, such as CBEL, are obligated to file STRs if they suspect that a party to the transaction is involved in money laundering or other illegal activities. As part of this settlement, the CBI and CBEL cannot claim that the transactions in these 2,700 reports resulted in illegal activity.

Coinbase said it has subsequently improved testing and oversight of its Transaction Monitoring System to stop such mistakes from happening.

“Coinbase recognizes the importance of effective AML procedures and takes our obligations under AML legislation and regulatory guidance very seriously,” the company said.

Coinbase’s efforts to shape how stablecoins regulations are applied

In the US, Coinbase is trying to shape how stablecoins regulations are applied. The exchange called on the US Treasury Department to ensure its upcoming rules for the GENIUS Act remain faithful to Congress’s original intent.

The exchange warned that excessive regulation could stifle innovation and undermine US leadership in crypto. In a detailed response to the Treasury, the exchange urged regulators to avoid expanding the law’s scope beyond what the statute requires.

“Treating third‐party rewards or loyalty programs as prohibited ‘interest’ would rewrite Congress’s carefully drawn lines and conflict with the statute’s purpose,” Coinbase said.

The exchange also proposed that payment stablecoins be recognized as cash equivalents for tax and accounting purposes.

Coinbase reported $1.9 billion in Q3 revenue on Thursday. They have beaten Wall Street estimates and recorded a 58% year-over-year increase. As reported by Cryptopolitan, the company’s earnings for the three months ending September 30 showed a 26% jump compared to the previous quarter.

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