CB Payments Limited (CBPL), part of cryptoasset trading platform Coinbase Group, has been fined over £3.5 million by the Financial Conduct Authority (FCA) after breaching its rules regarding high-risk customers.

CBPL, which is not currently registered to carry out cryptoasset activities in the UK, does not undertake cryptoasset transactions for customers but instead acts as a gateway for customers to trade cryptoassets via other entities within the Coinbase Group.

The regulator said that despite entering a voluntary requirement nearly four years ago which prevented the company from taking on new high-risk customers while it addressed issues with its financial crime control framework, the business has since onboarded or provided e-money services to more than 13,000 high-risk customers.

Roughly 31 per cent of these customers deposited around USD $24.9 million, with the funds being used to make withdrawals and execute multiple cryptoasset transactions via other Coinbase Group entities, totalling approximately USD $226 million.

The regulator's action was taken under the Electronic Money Regulations 2011, the first time it has taken enforcement action using these powers.

Therese Chambers, joint executive director of enforcement and market oversight at the FCA said that the breaches increased the risk that criminals could use CBPL to launder the proceeds of crime.

"We will not tolerate such laxity, which jeopardises the integrity of our markets," continued Chambers.

The FCA described CBPL's breaches as the result of the company's "lack of due skill, care and diligence" in the design, testing, implementation and monitoring of the controls put in place to ensure that the voluntary requirement was effective.

The UK watchdog went on to say that this included failing to consider all of the various ways in which customers might be onboarded when designing the controls.

Because of inadequacies in the initial monitoring of compliance with the requirement, repeated and material breaches went undiscovered for nearly two years.

CBPL qualified for a 30 per cent discount on its fine after agreeing to resolve the matter.

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