Brooklyn Bridge and the downtown Manhattan skyline in New York City

Crypto trading platform Coinbase Inc., is paying US$100 million under a settlement with the New York Department of Financial Services (DFS) for compliance failings uncovered by the regulator in its examinations of the firm.

The state regulator announced a settlement with Coinbase that will see the firm pay a US$50 million penalty and spend another US$50 million to beef up its compliance program over the next two years.

According to a consent order detailing the settlement, a compliance review in 2020 found “serious deficiencies in Coinbase’s compliance function across multiple areas…”

Specifically, the DFS said that it found weaknesses in the firm’s anti-money laundering program, including its KYC, transaction monitoring, and suspicious activity reporting systems.

“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth. That failure exposed the Coinbase platform to potential criminal activity requiring the Department to take immediate action including the installation of an independent monitor,” said Adrienne Harris, New York state’s superintendent of financial services, in a statement.

In early 2022, the DFS installed a monitor to start addressing the shortcomings. Under today’s consent order, the monitor will continue working with the firm for another year.

In a statement, the firm said that it took the regulator’s concerns seriously, and “have taken substantial measures to address these historical shortcomings.”

“We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space – for ourselves and others,” noted Paul Grewal, chief legal officer of Coinbase, in the statement.

“We recognize that the crypto industry is at an inflection point right now and that every public move by a crypto company will receive intense scrutiny,” he added. “We believe that New York – and the broader industry – needs more crypto players committed to compliance and working with regulators. That is one of the reasons why we knew it was important to bring this matter to a conclusion, even though it is never the type of agreement reached lightly.”