Coinbase Settles €21.5M Fine with Ireland Over Crypto Transaction Monitoring Errors

• The settlement addresses gaps in AML monitoring affecting transactions worth over $202 billion.

• Coinbase filed 2,700 suspicious activity reports on $15 million in transactions post-review.

• The fine, based on 4% of average annual revenue, underscores regulatory demands on crypto exchanges in Europe.

Coinbase Europe faces 21.5M euro fine for AML monitoring failures. Learn how coding errors impacted transactions and the steps taken to strengthen compliance in Ireland’s crypto hub.

What is the Coinbase Europe Limited settlement with the Central Bank of Ireland?

Coinbase Europe Limited, the European arm of the major U.S. cryptocurrency exchange, has agreed to a 21.5 million euro settlement with the Central Bank of Ireland due to technical shortcomings in its transaction monitoring system during 2021 and 2022. These issues stemmed from coding errors that prevented full screening of certain transactions for suspicious activities under anti-money laundering regulations. Following internal detection, Coinbase promptly corrected the errors and conducted a thorough review of impacted transactions.

Coinbase said it has enhanced oversight and compliance testing after coding errors led to gaps in transaction monitoring between 2021 and 2022.

Coinbase Europe Limited, the European affiliate of US crypto exchange Coinbase, has reached a 21.5 million euro ($24.7 million) settlement with the Central Bank of Ireland following technical failures in its transaction monitoring system between 2021 and 2022.

In a Thursday blog post, Coinbase said the coding errors caused the exchange’s internal compliance software to only partially screen some transactions for suspicious activity. The company said it detected the issue through internal testing, fixed it within weeks, and later re-reviewed all affected transactions.

Coinbase Europe ultimately filed around 2,700 suspicious transaction reports on transactions totaling roughly $15 million, out of the 185,000 transactions flagged during the review period. The company said that these filings do not confirm illicit activity, but were made as required under Irish Anti-Money Laundering (AML) laws.

According to a report by the Irish Independent, the value of these transactions exceeded $202 billion and accounted for approximately 31% of all Coinbase Europe transactions conducted during that period.

Top crypto exchanges by trading volume. Source: CoinMarketCap

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Why did Coinbase Europe Limited incur this AML compliance fine?

The penalty arose from three specific coding errors in five of Coinbase’s 21 transaction monitoring scenarios, which failed to properly screen cryptocurrency addresses separated by special characters. As a registered virtual asset service provider in Ireland, Coinbase must uphold robust systems to identify and report potential money-laundering risks, a requirement intensified by the nation’s role in European financial regulation. The Central Bank of Ireland calculated the 21.5 million euro fine—equivalent to 4% of the firm’s average annual revenue in Ireland from 2021 to 2024, estimated at $480 million—highlighting the severity of lapses in automated compliance tools.

The central bank based its fine on Coinbase’s average annual revenue in Ireland between 2021 and 2024, estimated at $480 million.

As a registered virtual asset service provider, Coinbase is required to maintain systems that detect and report potential money-laundering risks. The issue stemmed from three coding errors in five of Coinbase’s 21 monitoring “scenarios,” which failed to screen certain crypto addresses separated by special characters.

Coinbase said it has since enhanced testing and oversight of its Transaction Monitoring System to prevent similar errors. These updates include stricter pre-deployment reviews, expanded scenario testing and ongoing improvements to detect evolving high-risk activity.

“Coinbase recognizes the importance of effective AML procedures and takes our obligations under AML legislation and regulatory guidance very seriously,” the company said.

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Post-resolution, Coinbase implemented comprehensive upgrades to its Transaction Monitoring System, including rigorous pre-deployment code reviews, broader testing of monitoring scenarios, and continuous enhancements to identify emerging high-risk patterns in cryptocurrency transactions. These measures aim to align with evolving EU standards, particularly as the Markets in Crypto-Assets (MiCA) framework advances. Industry experts, such as those from the Financial Conduct Authority in the UK, emphasize that such proactive steps are essential for crypto firms to build trust with regulators and users alike.

Frequently Asked Questions

What triggered the need for 2,700 suspicious transaction reports from Coinbase Europe?

The reports were filed following a retrospective review of approximately 185,000 flagged transactions from 2021 to 2022, where coding errors had limited initial screening. Under Irish AML laws, these disclosures—covering $15 million in activity—were mandatory to ensure transparency, though they do not indicate confirmed illicit conduct. This process helped Coinbase reaffirm its commitment to regulatory compliance.

How has Coinbase strengthened its position as Ireland’s crypto hub amid this settlement?

Coinbase has bolstered its European operations by selecting Ireland as its primary hub in 2023, leveraging the country’s e-money license obtained in 2019 and preparing for MiCA’s rollout across the EU. Enhanced AML oversight and rapid issue resolution demonstrate resilience, positioning the exchange to serve 27 member states with reliable, compliant services that prioritize user security and market integrity.

Coinbase opened its office in Dublin, Ireland, back in 2018. In 2019, the exchange became “one of just a few companies” to receive an e-money license in the country.

In 2023, Coinbase officially selected Ireland as its European crypto hub, ahead of the Markets in Crypto-Assets (MiCA) regulation taking effect, which would allow the exchange to operate across all 27 EU member states.

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Key Takeaways

• Regulatory Scrutiny in Crypto: The 21.5 million euro settlement illustrates the Central Bank of Ireland’s focus on AML compliance, fining based on revenue to enforce accountability in virtual asset services.
• Technical Resilience: Coding errors affected 31% of transactions worth $202 billion, but swift internal fixes and reviews prevented broader risks, showcasing effective self-auditing in the sector.
• Future-Proofing Operations: Upgrades to monitoring systems, including expanded testing, prepare Coinbase for MiCA and underscore the need for ongoing innovation in compliance technology.

Conclusion

The Coinbase Europe Limited settlement with the Central Bank of Ireland marks a pivotal moment in addressing AML monitoring failures within the cryptocurrency industry, emphasizing the critical role of robust technical systems in high-volume trading environments. By resolving these issues through enhanced oversight and comprehensive reviews, Coinbase reinforces its dedication to regulatory standards and investor protection. As the EU’s MiCA regulations unfold, such compliance advancements will likely shape the landscape for crypto exchanges, encouraging others to prioritize similar improvements for sustainable growth.