Coinbase Europe Hit With €21.4 Million Fine by Bank of Ireland After 30 Million Crypto Transactions Go Unmonitored

One of the largest anti-money laundering (AML) supervision failures in Europe’s virtual asset sector has come to light, as the Bank of Ireland imposed a €21.4 million fine on Coinbase Europe after regulators discovered that more than 30 million crypto transactions escaped detection entirely.

The incident has exposed deep flaws in the company’s transaction monitoring systems—ranging from design and governance weaknesses to delayed disclosure, vendor oversight lapses, and a breakdown in AML control architecture.

The scale of the issue has stunned regulators and compliance professionals alike. Over 30,442,437 transactions went unmonitored under five of the twenty-one high-risk detection scenarios designed to capture suspicious crypto flows. These scenarios were meant to identify potential exposure to darknet activity, ransomware operators, theft and fraud clusters, malware infrastructure, illicit content markets, sanctioned networks, and wallets tied to cryptocurrency laundering typologies. Instead, due to longstanding configuration errors, the detection systems failed to trigger, leaving 31% of all transactions between April 2021 and March 2025 without the required surveillance coverage.

The total value of these unmonitored transactions was estimated at €176 billion—covering enterprise-scale transfers, cross-border wallet interactions, and exchange settlements that should have undergone enhanced scrutiny. Even low-risk asset flows moving through compromised liquidity routes or privacy-linked nodes escaped detection, creating what regulators later described as “compliance opacity.”

The failure stemmed from misconfigurations in the detection engine, which prevented Coinbase’s platform from cross-referencing transactions against blockchain identifiers associated with high-risk activity. These identifiers, stored in internal repositories, included wallets, mixer nodes, smart contract interactions, and exposure clusters tied to illicit financial conduct. For over a year, no one at Coinbase Europe realized that the rules were not firing, as internal assurance routines failed to detect the anomaly. The malfunction was “silently reproducible, structurally consistent, and undiscovered until third-party validation surfaced the issue.”

Although the malfunction was corrected by April 2022, no retroactive investigation was immediately launched. The firm continued to operate under full transaction volume, retaining regulatory obligations despite relying on group-level infrastructure for AML screening.

A backlog that turned months into years

Once regulators uncovered the full extent of the unmonitored activity, Coinbase Europe began a massive rescreening project, internally referred to as the retroactive transaction review. The company reprocessed more than 30 million transactions using updated monitoring logic. The effort generated 255,125 new alerts, of which 184,790 were escalated for in-depth investigation.

However, investigative action was delayed for months. By the time analysts began reviewing alerts, the transactions were long completed, funds dispersed, wallets obfuscated, and counterparties re-routed across jurisdictions. What should have been proactive monitoring became, effectively, a forensic reconstruction of past events.

The alert validation process unfolded gradually:

• 93% of alerts were validated by March 2024

• 99% by December 2024

• 100% closure was reached by March 2025

As a result of the delays, suspicious transaction reporting lost its immediacy. Coinbase eventually filed 2,708 suspicious transaction reports (STRs), covering over €13 million in potentially illicit activity. These transactions involved ransomware payments, illicit marketplace activity, sanctioned wallets, and cybercrime-linked wallet infrastructure.

The issue was not the discovery of suspicious activity—it was the failure to detect it when it mattered most. As the report observed, “The failure was not the discovery of suspicious behavior itself, it was that the detection failed to operate when the activity was live, traceable, disruptive, and actionable.”

Some users linked to flagged activity were later off-boarded, but those actions occurred long after the behaviors should have triggered immediate intervention.

Internal awareness and delayed disclosure

Perhaps the most damning revelation was that Coinbase Europe’s senior management knew of the failures long before regulators were informed. A timeline reconstructed by investigators showed:

• The initial configuration defect existed as early as 2020

• Early signs of failure appeared in 2021

• Additional breakdowns were confirmed in 2022

• A formal internal document describing the issue circulated in early 2023

• Senior executives discussed the exposure months before notifying authorities

• Formal regulatory disclosure did not occur until November 2023

That meant nine months passed between internal awareness and official escalation—a delay regulators later classified as an aggravating factor.

During this same period, Coinbase was in active dialogue with licensing and supervisory authorities, providing reassurances that the monitoring problems were mere “backlogs.” However, regulators clarified that there is a crucial distinction between a backlog and a monitoring failure. “One reflects capacity strain. The other reflects surveillance non-existence.”

When the regulator finally learned of the full scope, Coinbase was already deep into retroactive corrective work—another factor that underscored governance breakdown and late disclosure.

The regulatory verdict and penalties

Under Ireland’s anti-money laundering and counter-financing of terrorism (AML/CFT) frameworks, regulators assess compliance not by whether illicit activity occurred, but by whether effective surveillance systems were in place to detect and report it in time.

In Coinbase’s case, three core failures were identified:

1. Systemic breakdown in transaction surveillance

2. Ineffective internal controls and policies

3. Lack of enhanced monitoring when risk thresholds were met

The Bank of Ireland imposed a total penalty of €30,663,906, reduced to €21,464,734 following an early settlement, along with a formal reprimand.

The enforcement action establishes a precedent for virtual asset providers that rely on outsourced monitoring systems. Regulators highlighted several institutional lessons:

• “A firm cannot outsource regulatory responsibility when outsourcing operational capability.”

• “Data monitoring failures measuring in billions do not qualify as process defects, they qualify as surveillance failure.”

• “Remediation closure is not equal to reporting timeliness; historical correction does not replace real-time prevention.”

• “Crypto monitoring must validate rule performance at the control validation layer, not only at rule design level.”

• “Cloud-based screening infrastructure must produce evidence of execution, not just configuration intent.”

• “Governance must escalate known detection failures faster than remediation plans evolve.”

A cautionary lesson for the crypto sector

This enforcement action is not an indictment of cryptocurrency itself, but of the compliance architecture gaps that turned a regulated exchange into what regulators described as “an unintended blind corridor for activity that otherwise might have been visible, interceptable, and investigable.”

The investigation concluded that suspicious activity only became visible through retrospective reconstruction, effectively transforming AML oversight into “financial archaeology rather than live crime detection.”

Regulators emphasized that real-time detection in crypto markets must be “auditable by design and structurally immune to silent failures.” In distributed ledger systems, detection depends on timing, propagation analysis, wallet clustering, and transaction graph tracing—all of which lose value once funds are dispersed across chains.

As the final report warned, “If detection activates only after value transfer and wallet liquidity dispersion, suspicion recording becomes compliance documentation rather than enforcement intelligence.”

While not every compliance lapse demands systemic redesign, this case does. The Coinbase Europe fine, regulators say, stands as a defining test of accountability, control resilience, and the limits of outsourced compliance in the era of digital assets.

By fLEXI tEAM