According to the DFS, Coinbase had a backlog of more than 100,000 unreviewed transaction monitoring notifications by late 2021. It further said that at that time, the backlog of consumers requiring “additional due diligence” had surpassed 14,000 people. Coinbase’s approach to background checks was described as a “simple check-the-box exercise” by authorities.
In 2017, the DFS awarded Coinbase a licence to operate in New York. Compliance problems initially surfaced during the agency’s 2020 safety and soundness review. Following the investigation, the DFS directed Coinbase to seek an independent consultant to assess the compliance programme and provide suggestions on how to improve in areas where the agency believed the business was falling short. As a consequence, Coinbase devised a strategy to strengthen its compliance procedures. However, after an examination that started in 2021, the DFS decided that the programme could not “keep up with Coinbase’s fast and unanticipated expansion.” Coinbase currently has over 100 million users globally.
