The New York Department of Financial Services, or NYDFS, has announced a $30 million penalty on Robinhoodโs cryptocurrency arm for alleged violations related to anti-money laundering, cybersecurity and consumer protection laws.
In a Tuesday announcement, NYDFS superintendent Adrienne Harris said Robinhood Crypto will pay a $30 million penalty to the state โfor significant failures in the areas of bank secrecy act/anti-money laundering obligationsโ as well as cybersecurity failures that allegedly violated New York regulations. According to Harris, Robinhoodโs crypto unit will also be required to hire an independent consultant to evaluate the firmโs compliance and remediation efforts.
โAs its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance,โ said Harris. โAll virtual currency companies licensed in New York State are subject to the same anti-money laundering, consumer protection, and cybersecurity regulations as traditional financial services companies.โ
#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
โ NYDFS (@NYDFS) August 2, 2022
According to the NYDFSโs consent order, the department conducted an examination of Robinhood Crypto between January and September 2019, alleging that it had โfound serious deficiencies in RHCโs compliance function across multiple areas.โ The NYDFS then began an enforcement investigation, finding that Robinhoodโs crypto arm violated aspects of the Bank Secrecy Act, or BSA, and Anti-Money Laundering, or AML, regulations.
Among these violations were allegations Robinhood Crypto did not transition to an adequately sized transaction monitoring system o โdevote sufficient resources to adequately address risks.โ In addition, the financial regulator alleged Robinhood failed โto maintain on its website a telephone number for the receipt of customer complaintsโ as part of a supervisory agreement.
In a statement to Cointelegraph,ย Robinhoodย associate general counsel of litigation and regulatory enforcementย Cheryl Crumpton said the firm had reached a settlement in principle with the NYDFS in 2021 and disclosed the matter in its public filings. According to Crumpton, Robinhood made “significant progress building industry-leading legal, compliance, and cybersecurity programs.”ย
Related: Robinhood makes significant strides in crypto business in Q1 despite falling revenue
In June 2021, the U.S. Financial Industry Regulatory Authority penalized Robinhood for roughly $70 million for allegedly causing โwidespread and significant harmโ to thousands of users and exhibiting โsystemic supervisory failuresโ starting as early as September 2016. At the time of publication, shares of HOOD were trading at $9, having fallen roughly 0.3% in the last 24 hours.
