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On 23rd July 2024, the FCA fined Coinbase Payments Limited (CBPL) £3.5 million due to concerns over their business conduct, highlighting a lack of due skill, care, and diligence in ensuring compliance with CBPL’s VREQ to mitigate the financial crime risks posed by high-risk customers.

#### **Here are our learnings from our deep dive into the FCA notice.**

##### **Overall Impact**

1. Over 3 years CBPL breached VREQ requirements by onboarding and providing payment or e-money    services to 13K high-risk customers, prohibited deposits, totalling $24.9m.
2. Customers used funds to withdraw and execute multiple cryptoasset transactions via Coinbase Group entities, totalling ~$226m.
3. CBPL submitted SARs for 62 customers, transactions worth ~$1.75m (several exceeding $50K).

##### **Key Learnings**

✅ **Establish a comprehensive compliance framework with clearly defined roles and responsibilities**

An internal review identified documented VREQ compliance framework was not formalised and no formal document laid the roles of teams specifically for VREQs.

✅ **Ensure rigorous SDLC process, collaboration and accurate translation of regulatory requirements**

There were gaps in the initial implementation of CBPL’s VREQ potentially due to the use of different versions of the finalised FCA requirements. Ensuring end-to-end traceability of requirements and open communication across domains and teams is paramount to ensuring compliance.

✅ **Implement rigorous testing and monitoring**

There was a consistent lack of evidence surrounding the testing of the implementations and monitoring of the built system until a few years post-implementation.

✅ **Carefully manage, review and monitor migrations**

1,034 high-risk customers were migrated from another Coinbase Group entity. The required assessment was not conducted to determine whether the VREQ Flag should be applied to these accounts, resulting in the flag not applied correctly.

✅ **Ensure thorough audit trails & records**

CPBL was required to keep records relating to compliance with VREQ prior and post-implementation and sufficient evidence wasn’t available to support. Traceability of requirements through the entire process, audit trails and record keeping are crucial to a compliance solution.

✅ **Configurable policies that enable Human in the loop**

CBPL had no way to restrict the automated onboarding of high-risk retail customers requiring bespoke system changes. It is important to build systems that enable configurable policies to require conditional human-centred reviews.

Stay ahead of compliance challenges by integrating robust KYC and AML solutions that keep your organisation secure and compliant.


On 23rd July 2024, the FCA fined Coinbase Payments Limited (CBPL) £3.5 million due to concerns over their business conduct, highlighting a lack of due skill, care, and diligence in ensuring compliance with CBPL’s VREQ to mitigate the financial crime risks posed by high-risk customers.

Compliance Insights from FCA's £3.5M Penalty on Coinbase Payments

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In an era where the proliferation of digital technology is continuing to ramp up considerably, ensuring risk is sufficiently managed in this new sphere is vital. How has the onset of AI transformed this battle?

How is AI Transforming Risk Management?

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When it comes to complex data migrations, managing time and resources is a significant challenge. To address this, we developed MigratIO, a scalable solution designed to simplify the migration process.

To overcome this we chose Apache Spark as it's in-memory processing capabilities significantly accelerate data processing and reduce the latency that MigrateIO aims to achieve. Additionally, Spark's scalability and speed made it the ideal choice to handle the increasing data loads while maintaining high performance.

Our transition from DuckDB to Apache Spark has been a journey of growth and learning to the product and team but this switch wasn't without its challenges. Unlike DuckDB, integrating Spark allowed us to capitalise on our existing expertise in advanced technologies like Kubernetes and Argo, enhancing our ability to deploy Spark within the Spark Operator seamlessly and efficiently.

Another challenge was making sure our developers fully understood how Spark’s parallel distributed processing works and avoid mistakes. For example, if data isn't partitioned correctly or if intermediate results aren't cached, Spark jobs can unintentionally revert to a single-node operation, which defeats our goal of saving time and resources.

Despite that, by leveraging Spark, MigrateIO has greatly reduced processing times. For instance, we were able to transform 6 million transactions into the required format for our load systems, cutting the processing time from around 5 hours with DuckDB to just 30 minutes with Spark. By integrating Spark, MigrateIO’s capability was further enhanced to manage extensive migrations effectively, ensuring that businesses can smoothly transition their data using the product, regardless of size.

Furthermore, MigrateIO utilised the power of Argo for event-driven job submission and made the ETL processes asynchronous, which greatly improved the products efficiency. Even though now we offer the power of Spark distributed processing, we’ve given users the option to choose between DuckDB and Spark based on their data size and the costs involved.

One important thing to note is that MigrateIO as a product supports loading data to various targets, including SQL and NoSQL databases, Kafka streams, S3 locations and APIs. This flexibility has not only improved our product’s capabilities but also helped our developers expand their skills.

When it comes to complex data migrations, managing time and resources is a significant challenge. To address this, we developed MigratIO, a scalable solution designed to simplify the migration process.

From DuckDB to Apache Spark: Enhancing MigrateIO for Scalable and Efficient Data Migrations

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Excited to share this insightful discussion with our Data Engineering Lead Nikhil Manjunatha, where we dive into the key features and benefits of our data migration solution, MigratIO.

🎓 Watch to learn how our innovative approach simplifies complex data transitions and drives business efficiency. 

📈 Stay ahead of the curve with a product that’s designed to make data migration and reconciliation seamless and scalable.

Excited to share this insightful discussion with our Data Engineering Lead Nikhil Manjunatha, where we dive into the key features and benefits of our data migration solution, MigratIO.

Enabling Consistent and Reliable Data Migrations

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Introducing MigratIO: The Future of Data Migration

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**Migrations are hard.** They’re complex, time-consuming, and can cause immense brand damage if done poorly. So how do you ensure consistent and reliable data migrations? That’s where **MigratIO** comes in, turning potential risks into opportunities for growth. With our advanced tools and AI-driven features, we simplify even the most challenging migrations, giving you the confidence that your data will move smoothly and securely every time.🌟

🔹 **Seamless Migration**: MigratIO isn’t just about moving data; it’s about transforming how you approach migration. With our intuitive no-code platform, anyone can set up data pipelines, monitor progress, and ensure that migrations are smooth, secure, and repeatable. No more complex coding or manual intervention!

🔹 **AI-Driven Precision:** Powered by Artificial Intelligence and Machine Learning, MigratIO enables intelligent data mapping and predictive data transformation. Say goodbye to manual errors and hello to real-time insights and faster execution.

🔹 **Real-Time Monitoring & Auditing**: With real-time dashboards, you can track every aspect of the migration, identify errors instantly, and take corrective actions on the fly. Plus, our comprehensive audit trails ensure compliance, giving you complete peace of mind.

🔹 **Security & Scalability**: We know how crucial security is when handling sensitive data. MigratIO is built on a scalable architecture that maintains data integrity and adheres to the highest security standards, adhering to ACID principles for accuracy and consistency.

🔹 **Attribute-Level Reconciliation**: MigratIO goes beyond just migrating data—it ensures attribute-level reconciliation, comparing individual attributes across systems to ensure perfect data accuracy. By validating and reconciling data down to the attribute level, we ensure that every single field is correctly mapped, making your migration foolproof.

🔹**Reusable Templates & Rapid Testing**: Reduce downtime and streamline future migrations with reusable migration templates and rapid test cycles. MigratIO empowers you to test data quality early and often, ensuring that each migration is not just faster but better.

💼 **Why Choose MigratIO?**

- **No-Code Simplicity**: Accessible for everyone—business users and tech teams alike.
- **AI-Powered Efficiency**: Leverage automation for faster, more accurate migrations.
- **End-to-End Visibility**: Real-time insights at your fingertips.
- **Scalable & Secure**: Designed to handle even the most complex data environments.
- **Attribute-Level Reconciliation**: Ensure complete accuracy down to the individual data attribute.

Transform your data migration process with MigratIO and future-proof your business operations! 🌐 Learn more today at [Terra AI](https://terraai.io/) and see how we can help you migrate with confidence!

Migrations are hard. They’re complex, time-consuming, and can cause immense brand damage if done poorly. So how do you ensure consistent and reliable data migrations? That’s where MigratIO comes in, turning potential risks into opportunities for growth. With our advanced tools and AI-driven features, we simplify even the most challenging migrations, giving you the confidence that your data will move smoothly and securely every time.

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Since its inception as an official executive agency in 1988, Companies House has promoted trust and transparency in UK Businesses to help tackle financial crime. It incorporates, maintains, and dissolves UK companies.
 
Companies House has a significant challenge managing over 5 million registered UK limited companies and incorporating more than 500,000 new companies annually. This has led to a few issues:
 
📺 Fictional characters such as Donald Duck have been listed as directors of companies registered on Companies House.

🆔 Although an identity check is required to buy an energy drink, it is not required to establish a company.
 
Enterprises rely on Companies House data to verify their clients and make millions of business decisions.
 
From **October 2023,** the Economic Crime and Corporate Transparency Act 2023 (**ECCTA**) enables Companies House to:
 
- Investigate information
- Reject any non-legitimate information
- PO boxes can no longer be registered as an office address
- Introduce an intelligence hub to mitigate suspicious activity proactively
- Perform identity verification which will become mandatory for anyone setting up, controlling, or owning a company in the UK
- Add a confirmation clause so that all new and existing companies annually declare their business activities are lawful
 
Companies House stated this act introduced the biggest changes since corporate registrations were established in 1844. The enhanced powers came into effect on **4th March 2024**.
 
**The act will ensure:**

📝 All documents are updated promptly

✅ All information on the register is integral
 
🎯 Companies House business plan 2024/5 states the priority is to investigate and correct any known erroneous data first followed by other changes.

At [Quin](https://idquin.com/) we look forward to these changes.
Also, [here you can read](https://www.gov.uk/government/publications/companies-house-business-plan-2024-to-2025/companies-house-business-plan-2024-to-2025?utm_campaign=Newsletter%20%7C%20EMEA%20%7C%20APAC%20%7C%20AMER&utm_medium=email&_hsenc=p2ANqtz-_FGr__uUBPw1cTbrnDO-sMcS7Hwo-uPekQsVc5w09AVk3fH-Enpt4655sS0z4Xk8BqHLQnxb9SwU1PodLuTTq91FlAnA&_hsmi=320581627&utm_content=320280968&utm_source=hs_email#what-we-plan-to-deliver-from-april-2024-to-march-2025) the full article. 
 
 

Since its inception as an official executive agency in 1988, Companies House has promoted trust and transparency in UK Businesses to help tackle financial crime. It incorporates, maintains, and dissolves UK companies.

Reforms in Company Law: How the ECCTA 2023 Will Bring Transparency

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Navigating PEP Compliance: FCA’s Proposed Amendments and Their Impact on Financial Institutions

The FCA recently reviewed their guidance on the treatment of Politically Exposed persons (PEPs). Firms can use this guidance as an approach to meeting their legislative requirements that are set out in the regulations.
As a result, proposed amendments to this guidance have been shared for consultation to help facilitate effective compliance.
 
 **Proposed amendments** 

👉 Non-Executive Board Members (NEBMs) of civil service departments
As part of the review, it was noted that some firms were treating NEBMs as PEPs. The proposed amendment clarifies that NEBMs roles, in the UK context, shouldn’t be treated as PEPs.
 
👉 PEP relationship signoffs
It is a regulatory requirement that all PEP relationships are signed off by senior management. Currently, this is at minimum the Money Laundering Reporting Officer (MLRO) with higher level signoff potentially occurring for higher-risk relationships.

👉Reflect updates to Regulations
Early in 2024, the UK government updated regulations to require domestic PEPs risk assessment stat at a lower risk point than foreign PEPs. Guidance will be updated to reflect this legislative change.
 
👉 Minor changes
Further non-substantive changes have been made to update the guidance.
 
Clarifying who is considered a PEP and allowing for greater independence of the MLRO through expanding the scope of signoffs will help ensure seamless compliance experiences for both customers and firms. 

We feel the amendments are a step in the right direction, whilst further clarity could be provided in ensuring firms appropriately manage the EDD requirements for domestic and foreign PEPs.
 
At [Quin](https://idquin.com), we are excited to see substantive changes proposed based on reviews that seek to clarify this guidance to assist firms in their compliance journeys.
 
Configurable policies and workflows, such as Quin, ensure immediate integration of such changes to guidance, providing confidence in your FinCrime compliance journeys.

We look forward to the outcome and what the industry has to say.

The FCA recently reviewed its guidance on the treatment of Politically Exposed persons (PEPs). Firms can use this guidance as an approach to meeting their legislative requirements that are set out in the regulations.
As a result, proposed amendments to this guidance have been shared for consultation to help facilitate effective compliance.

Navigating PEP Compliance: FCA’s Proposed Amendments and Their Impact on Financial Institutions

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**As technology evolves, financial institutions often find it in their best interest to adopt new systems. However, apprehensions about data migration may be a significant deterrent.**

[DLT Apps](https://dltapps.com), which is transforming financial services through digital solutions, [recently discussed the challenges of large-scale data migrations](https://dltapps.com/resources/blogs-details/Enabling-Consistent-and-Reliable-Data-Migrations with Nikhil Manjunatha, their lead data engineer

Manjunatha began the discussion by highlighting the availability of newer, faster, and more secure technology platforms for firms in the financial sector. These tools can give them boosted efficiency, greater security and the ability to transform their operations. Migrating to these new solutions is vital.

Despite the opportunities, some financial institutions might be hesitant to migrate their data. Manjunatha explained, “One of the main reasons i think they are not doing it is because of the brand damage and risk associated with it. It takes a lot of effort and time, and the risk involved is high.”

There are solutions in the market that can give firms peace of mind for data migration. One of these is [TerraAI](https://terraai.io), the flagship platform from DLT Apps. The platform simplifies data processes through modern engineering practices and AI technology. The no-code solution can ensure repeatable, accurate and secure migrations with minimal downtime.

“We built TerraAI with all these risks in mind. We understood that migration should be about understanding the business and the data, and not about writing code to build each and every migration pipeline.”

Additionally, Manjunatha noted that solutions should be repeatable to accelerate development and testing cycles. Similarly, firms should prioritise getting to production quickly, as most data issues arise with real data that can only be proven in a live environment.

Other boons of TerraAI are that it comes with built-in reconciliation capabilities out-of-box, automatically generates attribute-level reconciliation reports, and additional business-specific reports can be configured when needed.

Watch the full interview [here](https://dltapps.com/resources/blogs-details/Enabling-Consistent-and-Reliable-Data-Migrations).

Keep up with all the latest FinTech news [here](https://fintech.global/category/fintech-news/).

As technology evolves, financial institutions often find it in their best interest to adopt new systems. However, apprehensions about data migration may be a significant deterrent.

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