Coinbase, a popular cryptocurrency exchange, has agreed to pay $50 million to settle a New York investigation into its anti-money laundering and know-your-customer practices. The settlement requires Coinbase to spend an additional $50 million over the next two years to address shortcomings identified by the New York Department of Financial Services (NYDFS).
According to NYDFS Superintendent Adrienne Harris, all financial institutions, including crypto companies, are expected to protect customers from “bad actors.” The investigation found that Coinbase had done a poor job at vetting new customers and examining transactions on the exchange to ensure they comply with state banking, cybersecurity and other rules.
As part of the settlement, Coinbase must strengthen its security to protect against money laundering, drug trafficking and fraud. The company must also review its backlog of more than 100,000 unreviewed transaction monitoring alerts and 14,000 customers requiring enhanced due diligence procedures by the end of 2021.
The settlement is part of a larger effort by the NYDFS to ensure that cryptocurrency exchanges are compliant with state regulations. The agency has already reached settlements with other crypto companies, including Ripple Labs and Bitfinex. Coinbase’s agreement is the largest to date and serves as a warning to other crypto companies to ensure they are compliant with state regulations.
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