Cryptocurrency exchange Coinbase agreed to pay a $50 million fine after financial regulators found it violated anti-money laundering laws by allowing customers to open accounts without adequate background checks, the New York Times reported. The settlement with the New York State Department of Financial Services, announced Wednesday, also calls for Coinbase to invest $50 million to bolster its compliance program, which is designed to prevent drug dealers, child pornography sellers and other potential offenders from opening accounts in the state.

Compliance issues at Coinbase were first uncovered during routine inspections in 2020 after the exchange received a license to operate in New York in 2017, the regulator said. They found problems with the exchange’s anti-money laundering controls dating back to 2018. Coinbase initially agreed to hire an independent consultant to help overhaul its day-to-day operations so they can meet requirements imposed by anti-money laundering laws to know the identities of customers and monitor their behavior for suspicious activity. But that didn't solve the company's problems, and regulators opened a formal investigation in 2021. The investigation revealed that the exchange was falling behind on two key business lines: digging into the background of customers who were at first glance unidentified, and following up on alerts generated by its internal monitoring systems for suspicious activity. In one 2021 case, someone inadvertently helped digital thieves steal $150 million from an unnamed company by claiming to be an employee of the company when they opened a Coinbase account.