Coinbase Fined €21.5 Million by Central Bank of Ireland Over Transaction Monitoring Errors

• Coinbase affiliate in Ireland pays €21.5m fine following past monitoring coding issues.
• Five scenarios missed certain transactions, which were later reviewed, leading to thousands of suspicion reports being filed.

Coinbase Europe Limited, the European arm of the U.S. crypto exchange, has agreed to pay a €21.5 million penalty to the Central Bank of Ireland following flaws found in its transaction monitoring system between 2021 and 2022.

The Irish regulator stated that faults in the configuration of Coinbase Europe’s system led to more than 30 million crypto transactions, valued at over €176 billion, going unmonitored across one year. These lapses raised regulatory concerns over the exchange’s anti-money laundering compliance.

Deputy Governor Colm Kincaid commented,

The fine was calculated based on Coinbase’s estimated average annual revenue in Ireland from 2021 to 2024, which totaled about $480 million.

Review Process and Filing Activity

The company had created its own Transaction Monitoring System to flag activity that might appear unusual. The system used 21 screening scenarios to alert compliance officers when anomalies appeared in transaction data.

During 2021 and 2022, the company discovered that three coding errors prevented five of those 21 scenarios from functioning correctly. Due to these flaws, some transactions that included crypto addresses separated by special symbols were not properly screened.

Coinbase said it detected the problem through internal testing and resolved the issue within two to three weeks.  After fixing the code, the company ran the affected transactions again for a full review. That review flagged about 185,000 transactions for further inspection out of roughly 97 million handled over that period.

After the assessment, Coinbase filed roughly 2,700 suspicious transaction reports with authorities covering transactions worth about €13 million. The Central Bank of Ireland and Coinbase both confirmed that these reports do not imply that any of those transactions were tied to criminal acts.

Coinbase Boosts Oversight to Avoid Future Failures

To prevent future lapses, Coinbase upgraded its monitoring processes and oversight mechanisms. The company added more pre-deployment testing before code changes and expanded its TMS capabilities to identify new risk patterns.

Coinbase also strengthened the oversight of its European operations through closer supervision of technical systems and compliance controls. These measures aim to prevent any recurrence of similar failures that could expose customers and regulators to compliance risks.

In a blog post, the company said,

Coinbase established its Dublin office in 2018 and became one of the first firms to secure an e-money license in Ireland a year later. In 2023, it designated Ireland as its main European hub ahead of the upcoming Markets in Crypto-Assets regulation, which will allow firms licensed in one EU country to operate across all 27 member states.