The New York Department of Financial Services, or NYDFS, has announced a $30 million fine against Robinhood’s crypto arm for alleged violations related to anti-money laundering, cybersecurity, and consumer protection laws.
In an announcement Tuesday, NYDFS Superintendent, Adrienne Harris, said that Robinhood Crypto will pay a $30 million fine to the state “for significant failures in the areas of bank secrecy law/compliance with anti-money laundering obligations,” as well as cybersecurity failures that allegedly violated New York regulations. According to Harris, Robinhood’s cryptocurrency unit will also have to hire an independent consultant to assess the firm’s compliance and remediation efforts.
“As its business grew, Robinhood Crypto failed to invest adequate resources and attention to develop and maintain a culture of compliance,” Harris said. “All virtual currency businesses licensed in New York State are subject to the same anti-money laundering, consumer protection and cybersecurity regulations as traditional financial services businesses.”
#ICYMI: DFS Superintendent Harris Announces $30 Million Penalty on Robinhood Crypto for Significant Anti-Money Laundering, Cybersecurity & Consumer Protection Violations. Read more: https://t.co/TUD2SwmOcw
— NYDFS (@NYDFS) August 2, 2022
According to the NYDFS consent order, the department conducted an examination of Robinhood Crypto between January and September 2019, claiming that it had “found serious deficiencies in RHC’s compliance function in multiple areas.” The NYDFS then began an enforcement investigation, finding that Robinhood’s cryptocurrency arm violated aspects of the Bank Secrecy Act, or BSA, and anti-money laundering, or AML, regulations.
Among these violations were allegations that Robinhood Crypto failed to transition to a properly sized transaction monitoring system or “devote sufficient resources to adequately address risks.” In addition, the financial regulator alleged that Robinhood failed to “maintain a customer complaint telephone number on its website” as part of an oversight agreement.
In a statement to Cointelegraph, Robinhood’s associate general counsel for litigation and enforcement, Cheryl Crumpton, said that the firm had reached an agreement in principle with the NYDFS in 2021 and disclosed the matter in its public filings. According to Crumpton, Robinhood made “significant progress in building industry-leading cybersecurity, compliance and legal programs.”
In June 2021, the United States Financial Industry Regulatory Authority fined Robinhood an estimated $70 million for allegedly causing “widespread and significant harm” to thousands of users and showing “systemic oversight failures” since September 2021. 2016. At press time, HOOD shares were trading at $9, having fallen roughly 0.3% in the last 24 hours.
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