The New York Department of Financial Services, or NYDFS, has fined Robinhood’s cryptocurrency arm $30 million for suspected anti-money laundering violations, cybersecurity, and consumer protection regulations.
NYDFS Superintendent Adrienne Harris announced on Tuesday that Robinhood Crypto would pay a $30 million penalty to the state “for major violations in the areas of bank secrecy act/anti-money laundering responsibilities” and cybersecurity issues that allegedly breached New York regulations. Robinhood’s crypto subsidiary, according to Harris, will also be compelled to employ an independent consultant to examine the firm’s compliance and rehabilitation activities.
“As its business grew, Robinhood Crypto failed to commit the necessary resources and attention to build and sustain a compliance culture,” Harris said. “All New York State-licensed virtual currency organizations are subject to the same anti-money laundering, consumer protection, and cybersecurity rules as traditional financial services companies.”
According to the cooperation order, the NYDFS investigated Robinhood Crypto between January and September 2019, stating that it discovered “severe weaknesses in RHC’s compliance function across several areas.” The NYDFS then launched an enforcement inquiry, discovering that Robinhood’s crypto subsidiary violated parts of the Bank Secrecy Act and Anti-Money Laundering (AML) regulations.
Among the infractions were claims that Robinhood Crypto did not shift to a sufficiently scaled transaction monitoring system or “dedicate sufficient resources to effectively address risks.” Furthermore, the financial authority claimed that Robinhood failed to “keep a telephone number for the collection of client complaints” as part of a supervisory agreement.
Robinhood associate general counsel of litigation and regulatory enforcement Cheryl Crumpton told Cointelegraph that the company struck a settlement in principle with the NYDFS in 2021 and revealed the situation in public papers. Crumpton claims that Robinhood has made “substantial progress” in developing “industry-leading legal, compliance, and cybersecurity programs.”
The US Financial Industry Regulatory Authority fined Robinhood $70 million in June 2021 for allegedly causing “widespread and serious harm” to thousands of users and demonstrating “systematic supervisory deficiencies” beginning in September 2016. HOOD shares were trading at $9 at the time of publication, down about 0.3 percent in the previous 24 hours.
Featured Image: DepositPhotos @iqoncept.