TLDR
- Coinbase Europe settled a €21.5 million ($24.7 million) fine with the Central Bank of Ireland for transaction monitoring failures between 2021 and 2022.
- Three coding errors affected five of 21 monitoring scenarios, causing over 30 million transactions worth $203 billion to be improperly screened for suspicious activity.
- The exchange filed 2,708 suspicious transaction reports after reviewing affected transactions, which took nearly three years to complete.
- The reports included suspicions of money laundering, fraud, drug trafficking, ransomware attacks, and child sexual exploitation.
- Coinbase received a 30% discount on the fine for cooperating and has enhanced its compliance testing and oversight procedures.
Coinbase Europe Limited has agreed to pay €21.5 million ($24.7 million) to settle a case with the Central Bank of Ireland. The fine relates to failures in the exchange’s transaction monitoring system between 2021 and 2022.
The problem started with three coding errors in the exchange’s compliance software. These errors affected five of the 21 monitoring scenarios that Coinbase used to screen transactions for suspicious activity.
The bugs caused the system to miss certain crypto addresses. Specifically, addresses separated by special characters were overlooked by the affected scenarios.
The scope of the failure was large. Over 30 million transactions were not properly screened during a 12-month period.
The total value of these improperly monitored transactions exceeded $203 billion. This represented about 31% of all Coinbase Europe transactions during that time frame.
Coinbase detected the issue through its own internal testing. The company fixed the coding errors within weeks of discovery.
But fixing the immediate problem was just the start. The exchange then had to review all the transactions that had been affected.
The Long Review Process
That review process took nearly three years to complete. The Central Bank of Ireland noted this extended timeline in its enforcement action.
The delayed monitoring led to the filing of 2,708 Suspicious Transaction Reports with Ireland’s Financial Intelligence Unit. These reports totaled approximately $15 million in flagged transactions out of the 185,000 transactions reviewed.
The suspicious activity reports covered serious criminal concerns. The categories included money laundering, fraud and scams, drug trafficking, cyber-attacks like ransomware, and child sexual exploitation.
Coinbase clarified that filing these reports doesn’t confirm actual illicit activity occurred. The filings were made as required under Irish Anti-Money Laundering laws when suspicious patterns are detected.
Central Bank of Ireland deputy governor Colm Kincaid said law enforcement relies on financial institutions to have working monitoring systems. He said the failure of such a system creates opportunities for criminals to evade detection.
Changes After the Settlement
The fine was calculated based on Coinbase’s average annual revenue in Ireland between 2021 and 2024. That figure was estimated at $480 million.
Coinbase received a 30% discount on the penalty. This reduction came because the exchange admitted to the violations and cooperated with regulators.
The company has made changes to prevent similar problems. These updates include stricter reviews before deploying new code, expanded testing of monitoring scenarios, and ongoing improvements to detect high-risk activity.
Coinbase said it recognizes the importance of effective AML procedures. The exchange stated it takes its obligations under AML legislation very seriously.
The company has been operating in Ireland since opening a Dublin office in 2018. In 2019, Coinbase received an e-money license from Irish authorities, becoming one of the first companies to obtain such approval.
In June 2024, Coinbase moved its European regulatory base from Ireland to Luxembourg. The exchange now holds a license under Europe’s Markets in Crypto Assets regime in Luxembourg.
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