diff --git a/chancloser.go b/chancloser.go
index ea257014..a21ca525 100644
--- a/chancloser.go
+++ b/chancloser.go
@@ -82,11 +82,6 @@ type chanCloseCfg struct {
 	// broadcastTx broadcasts the passed transaction to the network.
 	broadcastTx func(*wire.MsgTx) error
 
-	// settledContracts is a channel that will be sent upon once the
-	// channel is partially closed. This notifies any sub-systems that they
-	// no longer need to watch the channel for any on-chain activity.
-	settledContracts chan<- *wire.OutPoint
-
 	// quit is a channel that should be sent upon in the occasion the state
 	// machine shouldk cease all progress and shutdown.
 	quit chan struct{}
@@ -452,14 +447,6 @@ func (c *channelCloser) ProcessCloseMsg(msg lnwire.Message) ([]lnwire.Message, b
 			}
 		}
 
-		// As this contract is final, we'll send it over the settled
-		// contracts channel.
-		select {
-		case c.cfg.settledContracts <- &c.chanPoint:
-		case <-c.cfg.quit:
-			return nil, false, fmt.Errorf("peer shutting down")
-		}
-
 		// Clear out the current channel state, marking the channel as
 		// being closed within the database.
 		closingTxid := closeTx.TxHash()
diff --git a/fundingmanager.go b/fundingmanager.go
index d413a9e2..e3b5309f 100644
--- a/fundingmanager.go
+++ b/fundingmanager.go
@@ -169,6 +169,12 @@ type fundingConfig struct {
 	// so that the channel creation process can be completed.
 	Notifier chainntnfs.ChainNotifier
 
+	// ArbiterChan allows the FundingManager to notify the BreachArbiter
+	// that a new channel has been created that should be observed to
+	// ensure that the channel counterparty hasn't broadcast an invalid
+	// commitment transaction.
+	ArbiterChan chan<- wire.OutPoint
+
 	// SignMessage signs an arbitrary method with a given public key. The
 	// actual digest signed is the double sha-256 of the message. In the
 	// case that the private key corresponding to the passed public key
@@ -1984,6 +1990,15 @@ func (f *fundingManager) handleFundingLocked(fmsg *fundingLockedMsg) {
 		return
 	}
 
+	// With the channel retrieved, we'll send the breach arbiter the new
+	// channel so it can watch for attempts to breach the channel's
+	// contract by the remote party.
+	select {
+	case f.cfg.ArbiterChan <- *channel.ChanPoint:
+	case <-f.quit:
+		return
+	}
+
 	// The funding locked message contains the next commitment point we'll
 	// need to create the next commitment state for the remote party. So
 	// we'll insert that into the channel now before passing it along to
diff --git a/lnd.go b/lnd.go
index e93b2d8c..f54657e3 100644
--- a/lnd.go
+++ b/lnd.go
@@ -268,6 +268,7 @@ func lndMain() error {
 				idPrivKey.PubKey())
 			return <-errChan
 		},
+		ArbiterChan:      server.breachArbiter.newContracts,
 		SendToPeer:       server.SendToPeer,
 		NotifyWhenOnline: server.NotifyWhenOnline,
 		FindPeer:         server.FindPeer,
diff --git a/peer.go b/peer.go
index e142d426..e643c223 100644
--- a/peer.go
+++ b/peer.go
@@ -382,16 +382,15 @@ func (p *peer) loadActiveChannels(chans []*channeldb.OpenChannel) error {
 			DecodeOnionObfuscator: p.server.sphinx.ExtractErrorEncrypter,
 			GetLastChannelUpdate: createGetLastUpdate(p.server.chanRouter,
 				p.PubKey(), lnChan.ShortChanID()),
-			SettledContracts: p.server.breachArbiter.settledContracts,
-			DebugHTLC:        cfg.DebugHTLC,
-			HodlHTLC:         cfg.HodlHTLC,
-			Registry:         p.server.invoices,
-			Switch:           p.server.htlcSwitch,
-			FwrdingPolicy:    *forwardingPolicy,
-			FeeEstimator:     p.server.cc.feeEstimator,
-			BlockEpochs:      blockEpoch,
-			PreimageCache:    p.server.witnessBeacon,
-			ChainEvents:      chainEvents,
+			DebugHTLC:     cfg.DebugHTLC,
+			HodlHTLC:      cfg.HodlHTLC,
+			Registry:      p.server.invoices,
+			Switch:        p.server.htlcSwitch,
+			FwrdingPolicy: *forwardingPolicy,
+			FeeEstimator:  p.server.cc.feeEstimator,
+			BlockEpochs:   blockEpoch,
+			PreimageCache: p.server.witnessBeacon,
+			ChainEvents:   chainEvents,
 			UpdateContractSignals: func(signals *contractcourt.ContractSignals) error {
 				return p.server.chainArb.UpdateContractSignals(
 					*chanPoint, signals,
@@ -1275,16 +1274,15 @@ out:
 				DecodeOnionObfuscator: p.server.sphinx.ExtractErrorEncrypter,
 				GetLastChannelUpdate: createGetLastUpdate(p.server.chanRouter,
 					p.PubKey(), newChanReq.channel.ShortChanID()),
-				SettledContracts: p.server.breachArbiter.settledContracts,
-				DebugHTLC:        cfg.DebugHTLC,
-				HodlHTLC:         cfg.HodlHTLC,
-				Registry:         p.server.invoices,
-				Switch:           p.server.htlcSwitch,
-				FwrdingPolicy:    p.server.cc.routingPolicy,
-				FeeEstimator:     p.server.cc.feeEstimator,
-				BlockEpochs:      blockEpoch,
-				PreimageCache:    p.server.witnessBeacon,
-				ChainEvents:      chainEvents,
+				DebugHTLC:     cfg.DebugHTLC,
+				HodlHTLC:      cfg.HodlHTLC,
+				Registry:      p.server.invoices,
+				Switch:        p.server.htlcSwitch,
+				FwrdingPolicy: p.server.cc.routingPolicy,
+				FeeEstimator:  p.server.cc.feeEstimator,
+				BlockEpochs:   blockEpoch,
+				PreimageCache: p.server.witnessBeacon,
+				ChainEvents:   chainEvents,
 				UpdateContractSignals: func(signals *contractcourt.ContractSignals) error {
 					return p.server.chainArb.UpdateContractSignals(
 						*chanPoint, signals,
@@ -1446,7 +1444,6 @@ func (p *peer) fetchActiveChanCloser(chanID lnwire.ChannelID) (*channelCloser, e
 				channel:           channel,
 				unregisterChannel: p.server.htlcSwitch.RemoveLink,
 				broadcastTx:       p.server.cc.wallet.PublishTransaction,
-				settledContracts:  p.server.breachArbiter.settledContracts,
 				quit:              p.quit,
 			},
 			deliveryAddr,
@@ -1523,7 +1520,6 @@ func (p *peer) handleLocalCloseReq(req *htlcswitch.ChanClose) {
 				channel:           channel,
 				unregisterChannel: p.server.htlcSwitch.RemoveLink,
 				broadcastTx:       p.server.cc.wallet.PublishTransaction,
-				settledContracts:  p.server.breachArbiter.settledContracts,
 				quit:              p.quit,
 			},
 			deliveryAddr,
diff --git a/rpcserver.go b/rpcserver.go
index 42ec099b..ada106a7 100644
--- a/rpcserver.go
+++ b/rpcserver.go
@@ -847,7 +847,7 @@ func (r *rpcServer) CloseChannel(in *lnrpc.CloseChannelRequest,
 		}
 
 		select {
-		case r.server.breachArbiter.settledContracts <- chanPoint:
+		case r.server.breachArbiter.settledContracts <- *chanPoint:
 		case <-r.quit:
 			return fmt.Errorf("server shutting down")
 		}
diff --git a/test_utils.go b/test_utils.go
index d4e6d97a..afdfa9ea 100644
--- a/test_utils.go
+++ b/test_utils.go
@@ -248,9 +248,7 @@ func createTestPeer(notifier chainntnfs.ChainNotifier,
 		wallet:        wallet,
 	}
 
-	breachArbiter := &breachArbiter{
-		settledContracts: make(chan *wire.OutPoint, 10),
-	}
+	breachArbiter := &breachArbiter{}
 
 	chainArb := contractcourt.NewChainArbitrator(
 		contractcourt.ChainArbitratorConfig{}, nil,