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Coinify, a company that enables merchants to accept crypto payments, has been reprimanded by the Danish Financial Supervisory Authority (DFSA) over compliance failures related to money laundering controls.
The DFSA has ordered Coinify, a provider of cryptocurrency services, to improve its anti-money laundering (AML) practices following an inspection in September 2023 that focused on Coinify's adherence to money laundering regulations.
The regulator examined the firm’s customer knowledge procedures and its compliance with its investigation, transaction monitoring and record-keeping obligations.
Coinify, which is headquartered in Denmark and has been in operation since 2014, credits itself on its website in being “financially compliant in 180 markets”, stating that “security and compliance is in our DNA”.
It touts its work alongside national and international regulatory bodies — for example, as a founding member of the European Commission’s Blockchain and Virtual Currencies Working Group — and markets itself as allowing its customers to “accept the future of finance”.
Risky simplicity
The DFSA’s inspection identified several shortcomings in Coinify’s AML procedures, leading to a series of corrective orders.
In particular, it criticised the company’s simplified customer risk scoring model, stating that it had failed to account for all relevant risk factors.
The regulator mandated the company to strengthen its risk classification process for both private and business customers, requiring it to ensure that each customer is assessed based on documented and comprehensive criteria.
Unsatisfactory due diligence
Coinify has also come under fire for its customer due diligence (CDD), as it had been carrying this out on the assumption that its customers conduct one-off transactions.
The DFSA determined, however, that Coinify’s customer relationships are ongoing, requiring the company to conduct more thorough CDD measures, including regular assessments of the business relationship’s purpose and continuous monitoring of customer transactions.
During the inspection, the DFSA also found that high-risk customers were being treated similarly to low-risk ones, with inadequate documentation and insufficient enhanced CDD measures.
It ordered Coinify to apply stricter due diligence for high-risk customers, ensuring a deeper understanding of their activities to detect suspicious behaviour.
Poor record-keeping
The DFSA criticised Coinify’s compliance with record-keeping obligations, having discovered that it was not adequately documenting investigations into suspicious transactions.
In some cases, the steps taken were either poorly recorded or were stored across different systems, and the regulator stressed the importance of detailed record-keeping to support effective investigations and reporting to authorities.
Coinify has been ordered to improve its documentation processes to ensure that all investigations are properly recorded and stored.
Vixio has approached Coinify for comment, but they had not responded by the time of publication.
