Coinbase Faces $24.7M Penalty Due to Serious Tech Mistakes Leaving Suspicious Transactions Unprocessed

Coinbase Europe Limited has agreed to pay a €21.5 million ($24.7 million) fine following significant compliance failures in its transaction monitoring system. Errors between 2021 and 2022 resulted in a considerable number of customer transactions not being screened for suspicious activities. The company has since improved its monitoring systems and compliance measures to prevent similar issues in the future.

Key Takeaways

Coinbase Europe is facing a €21.5 million fine due to unscreened transactions for suspicious activities between 2021-2022.
The Central Bank of Ireland identified serious compliance failures in the crypto exchange's monitoring systems.
Approximately 31% of transactions were not adequately screened, totaling over $202 billion.
Coinbase has committed to improving its compliance measures following this incident.

Coinbase Hit With $24.7M Fine After "Critical" Tech Errors Left Suspicious Transactions Unscreened

Coinbase Penalized for Compliance Failures

Coinbase Europe Limited, the European division of the U.S. cryptocurrency exchange Coinbase, will pay a fine of €21.5 million ($24.7 million) to the Central Bank of Ireland (CBI). This penalty arises from a series of significant coding errors that resulted in thousands of customer transactions being left unscreened for suspicious activities between 2021 and 2022.

According to the Irish regulator, these errors constituted a "critical compliance lapse" in Coinbase's transaction monitoring systems designed to identify potential money laundering and other illegal activities. The flaws affected about 31% of all transactions processed by Coinbase Europe during this time, which totaled more than $202 billion, as reported by the Irish Independent.

Coinbase Enhances Oversight Following Fine

Coinbase announced the settlement in a blog post, confirming full cooperation with the regulator. The company attributed the issue to three coding errors impacting five of its 21 monitoring scenarios, which led to only partial screening of some transactions.

As part of their review, Coinbase re-evaluated around 185,000 of the approximately 97 million total transactions processed during the period. This reassessment resulted in the filing of about 2,700 suspicious transaction reports (STRs) with the Irish authorities, with a combined value of €13 million.

Importantly, Coinbase stated that the settlement does not imply that any flagged transactions were definitively linked to criminal activity. The CBI's fine was based on Coinbase's average annual revenue in Europe, estimated at €417 million from 2021 to 2024.

Coinbase corrected the coding issues within weeks of identifying them and has since reinforced its transaction monitoring and compliance systems to prevent such lapses in the future.

Coinbase Europe, which opened an office in Dublin in 2018, has been working to strengthen its presence in the EU as it prepares for the upcoming Markets in Crypto-Assets (MiCA) regulation. In 2023, it designated Ireland as its European hub, enabling operations across all 27 EU member states once MiCA is finalized.

Increasing Regulatory Pressure on Coinbase

The fine in Ireland adds to a wave of regulatory challenges facing Coinbase's international operations. In July 2024, the UK subsidiary, CB Payments Limited, was fined £3.5 million ($4.5 million) by the Financial Conduct Authority (FCA) for violating a self-imposed restriction that barred it from onboarding high-risk customers. The FCA discovered that CB Payments had provided e-money services to over 13,000 high-risk customers, resulting in nearly $226 million being transferred through Coinbase-linked platforms despite these restrictions.

This FCA action marked the first enforcement under the UK’s Electronic Money Regulations 2011, raising alarms about broader regulatory scrutiny of cryptocurrency firms in Britain. Legal experts characterized this incident as an isolated case rather than an industry-wide crackdown.

In Europe, regulators are also tightening anti-money laundering (AML) oversight of cryptocurrency platforms in advance of MiCA's complete rollout. In France, regulators are conducting on-site AML inspections of numerous registered digital asset firms, including Binance and Coinhouse, to determine compliance with EU-wide licensing standards. According to reports, the French Prudential Supervision and Resolution Authority (ACPR) has insisted that Binance improve its risk controls during these evaluations.

Regulators in France, Austria, and Italy have further called for the EU’s top markets authority to take on direct supervision of major crypto exchanges due to concerns about inconsistent enforcement among member states.

In light of these challenges, Coinbase has emphasized that it is taking proactive measures to strengthen its transaction monitoring systems. The company has expanded testing protocols, introduced additional internal oversight layers, and added new monitoring scenarios to better detect high-risk activities.

"Coinbase acknowledges the importance of effective AML procedures and is serious about its obligations under AML legislation and regulatory guidance," the company stated, reaffirming its objective of establishing "the most trusted, compliant, and secure platform in the world."