Coinbase Fined €21.5M in Ireland for Massive Transaction-Monitoring Failure

The post Coinbase Fined €21.5M in Ireland for Massive Transaction-Monitoring Failure appeared first on Coinpedia Fintech News

Coinbase, one of the world’s largest cryptocurrency exchanges, has been fined €21.5 million by the Central Bank of Ireland for failing to properly monitor millions of customer transactions. The regulator said Coinbase’s European division did not screen over 30 million transactions between 2021 and 2022, worth more than €176 billion. Some of these transactions were later flagged as potentially linked to criminal activity, including money laundering, drug trafficking, scams, and even child sexual exploitation.

The fine was reduced from an initial €30.7 million after Coinbase agreed to settle with the authorities.

What Went Wrong in Coinbase’s System

Coinbase told regulators that the issue occurred because of three coding errors in its transaction-monitoring software. The system was designed to automatically review customer activity and flag suspicious or high-risk behavior. However, five of the monitoring checks were not functioning correctly, meaning many transactions went through without being screened.

In one example highlighted by the Central Bank, the software failed to recognize cryptocurrency wallet addresses containing special characters. That single flaw resulted in a large portion of transactions bypassing Coinbase’s automated compliance filters.

Coinbase discovered the issue through internal testing. The company said it corrected the software within a few weeks, but reviewing the backlog took much longer. The Central Bank revealed that Coinbase needed almost three years to fully evaluate the missed transactions.

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Transactions Linked to Possible Crimes

During the review, Coinbase flagged 184,790 individual transactions for additional investigation. Approximately €13 million worth of transactions were later reported as suspicious to authorities. The Central Bank said it cannot confirm whether those transactions resulted in criminal acts, but noted that failing to monitor them in the first place was a major regulatory breach.

The regulator also criticized Coinbase for not having proper internal controls and procedures to prevent money laundering and terrorist financing. In some cases, customers involved in suspicious activity were removed from the platform, but the regulator said they had continued access for longer than they should have due to weak monitoring.

Coinbase Promises Stronger Compliance

Coinbase says it has fixed the errors, added new oversight procedures, and strengthened its monitoring system to prevent similar issues. The company emphasized that the errors were unintended and that compliance remains a priority.

Ireland’s Central Bank also confirmed that Coinbase plans to move its European business to Luxembourg by the end of the year, meaning it will no longer operate in Ireland.

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