Ireland’s central bank has slapped a hefty fine of 21.5 million euros (about $25 million) on Coinbase’s Irish branch for failing to properly monitor transactions for money laundering and terrorist activities. The issue came down to mistakes in how Coinbase Europe’s system was set up, causing over 30 million transactions worth more than 176 billion euros to go unchecked for a whole year.
It took Coinbase nearly three years to sort out the backlog and report 2,708 suspicious transactions to the authorities. These transactions raised red flags linked to serious crimes like money laundering, fraud, drug trafficking, cyberattacks, and child sexual exploitation.
Coinbase admitted it made three coding errors in its transaction monitoring system in 2021 and 2022. These errors meant that five out of 21 alert scenarios didn’t fully screen all transactions. The company fixed the problems within a few weeks after finding them and promised to improve its checks to avoid similar issues in the future.
The central bank agreed to reduce the fine from 30.7 million euros, considering Coinbase Europe’s yearly revenue of around 417 million euros. However, the bank also cautioned that faulty systems like this create chances for criminals to slip through the cracks, especially since cryptocurrencies are known for their anonymity and ease of cross-border movement.
This case highlights the challenges facing regulators as digital currencies become more popular. It also shows how vital it is for crypto firms to keep a close eye on their systems to prevent misuse by criminals.