Ireland’s Central Bank has fined Coinbase Europe $24.6 million for serious breaches in its anti-money laundering (AML) and counter-terrorist financing (CTF) efforts. These issues resulted from major issues in the company’s transaction monitoring system (TMS).
Coinbase’s TMS failed to properly screen millions of cryptocurrency transactions, running into the billions, between April 2021 and March 2022. The problems affected approximately 31% of all transactions during the period, highlighting the potential risks associated with illegal financial activities.
Coinbase Cites Technical Error
The fine, which was reduced from an initial $33.7 million due to Coinbase’s cooperation with the investigation, marks the first regulatory enforcement action taken by Ireland against a cryptocurrency firm. This indicates that the government is paying closer attention to the growing industry.
A technical error in Coinbase’s transaction management system enabled over 30 million transactions to bypass essential checks, including crucial reviews for potential money laundering signs. In addition, the system overlooked nearly 185,000 high-risk transactions that needed closer attention, which increased the risk of misuse.
While the investigation did not uncover any confirmed criminal activity, the central bank was critical of the nearly three-year delay in fully addressing the issues. This emphasizes the importance of promptly reporting system failures.
Coinbase’s Path to Compliance
The Irish Central Bank began investigating Coinbase after the company reported compliance issues at the end of 2022. The review continued into 2024. During the investigation, Coinbase identified $14.2 million in potentially suspicious funds and submitted 2,700 suspicious activity reports to the Irish authorities.
The report, though, indicates that the company took regulatory requirements seriously, despite some gaps that delayed enforcement actions. When determining the fine, the Central Bank considered Coinbase’s average annual revenue of $456 million from its Irish operations between 2021 and 2024.
Meanwhile, Coinbase has committed to improving its compliance measures and has already taken steps to address the identified issues. The company has enhanced its Transaction Monitoring System (TMS) by implementing rigorous testing protocols and introducing automated methods to identify and resolve issues more efficiently.
Additionally, it has strengthened its internal audits to prevent future mistakes. The company’s commitment to meeting anti-money laundering (AML) requirements may inspire other companies in the crypto industry to enhance their compliance systems as regulations become more stringent.
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