New York Department of Financial Services (NYDFS) has announced a $30 Million penalty against Robinhood’s cryptocurrency arm, for alleged violations in relation to anti-money laundering and cybersecurity.
Adrienne Harris, NYDFS’ superintendent, announced Tuesday that Robinhood Crypto would pay $30 million to the state for “significant failures in areas of bank secrecy Act/anti-money laundering obligations” and cybersecurity violations. Harris stated that Robinhood’s crypto division will be required to employ an independent consultant to assess the firm’s compliance efforts and remediation efforts.
Harris stated that Robinhood Crypto did not invest enough resources or attention in establishing and maintaining a culture for compliance as its business grew. “All licensed virtual currency companies in New York State are subjected to the same anti money laundering, consumer protection and cybersecurity regulations as traditional financial service companies.”
#ICYMI: DFS Superintendent Harris Announces a $30 Million Penalty on Robinhood crypto for Serious Anti-Money Laundering, Cybersecurity and Consumer Protection Violations. Read more: https://t.co/TUD2SwmOcw
August 2, 2022 — NYDFS (@NYDFS).
According to the consent order of the NYDFS, the department examined Robinhood Crypto between January 2019 and September 2019. It found “serious deficiencies in RHC’s compliance function across multiple area.” The NYDFS began an enforcement investigation and discovered that Robinhood’s cryptocurrency arm was violating aspects of the Bank Secrecy act, or BSA, as well as Anti-Money Laundering or AML regulations.
Robinhood Crypto was accused of not having migrated to a sufficiently sized transaction monitoring system to “detain sufficient resources to adequately address risk.” The financial regulator also claimed Robinhood did not maintain a phone number to receive customer complaints as part of a supervision agreement.
Robinhood’s associate general counsel for litigation and regulatory enforcement Cheryl Crumpton stated that the firm reached a principle settlement with the NYDFS in 2021. The matter was disclosed in the firm’s public filings. Crumpton stated that Robinhood had made significant progress in building industry-leading cybersecurity, legal and compliance programs.
Related: Robinhood’s Q1 progress in crypto business despite falling revenues
The U.S. Financial Industry Regulatory Authority (USFIRA) penalized Robinhood with a fine of approximately $70 million in June 2021 for allegedly causing “widespread, significant harm” to thousands and displaying “systemic supervision failures” since September 2016. HOOD shares were trading at $9 at the time of publication. They had fallen 0.3% over the past 24 hours.