Coinbase agreed Wednesday to pay a $50 million fine for failing to conduct proper background checks of customers. The settlement with the New York State Department of Financial Services (NYDFS) also requires the crypto trading platform to spend another $50 million over two years to beef-up its anti-money-laundering controls.

The New York regulators found problems with Coinbase's compliance program dating to 2018.

"We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space – for ourselves and others," Coinbase's chief legal officer, Paul Grewal, wrote on its website.

People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021.
People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021. Reuters / Shannon Stapleton

The NYDFS requires Coinbase and rival cryptocurrency exchanges to conduct background checks of customers to prevent drug traffickers, sellers of child pornography and other criminals from opening accounts.

The New York Times reported that by late 2021 Coinbase had a backlog of over 100,000 alerts of potential suspicious activity that it didn't properly investigate. In addition, its background check system only consisted of a "simple check-the-box exercise," allowing anyone to open an account without oversight.

"We found failures that really warranted putting in place an independent monitor rather than wait for a settlement," Adrienne A. Harris, New York State's superintendent of financial services, said in an interview with the Times. "We have been very outspoken about illicit financing concerns in the space. It is why our framework holds crypto companies to the same standard as for banks."

The publicly traded Coinbase is the largest U.S.-based cryptocurrency exchange. Coinbase's (COIN) share price surged more than 11% after the settlement was announced.