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Robinhood’s crypto unit fined $30 million by New York regulator

NYDFS investigation revealed that the company had insufficient staff and had failed to transition to an automated system that was compliant with the Bank Secrecy Act and anti-money laundering regulations due to insufficient staff and inadequate staffing levels.

In its first crackdown on the crypto industry, the New York State Department of Financial Services fined the cryptocurrency trading operation of Robinhood Markets Inc., an online brokerage, $30 million for alleged violations of anti-money-laundering and cybersecurity regulations, according to the department’s press release.

The New York State Department of Financial Services reported on Tuesday that Robinhood Crypto LLC was not maintaining and certifying its anti-money laundering and cybersecurity programs as required by the law. It is also required that Robinhood retain an independent consultant as part of the consent order in order to evaluate its compliance with NYDFS’s regulations and the remediation efforts it has taken.

According to the regulator, the company’s failures were caused by a lack of management and oversight of its compliance programs, which was a result of shortcomings in the company’s management. There were many failures that contributed to this, including failures to foster and maintain a culture of compliance and a failure to allocate adequate resources to these programs, especially when the company grew rapidly, which in turn exacerbated the problems.

As a result of the NYDFS’ investigation, the company was found to be insufficiently staffed and to have failed to transition from a manual transaction monitoring system that was suitable for the company’s size, transaction volumes, and customer profiles to an automated transaction monitoring system for compliance with the Bank Secrecy Act and anti-money-laundering regulations. In addition to failing to address the company’s operational risks, Robinhood’s cybersecurity program was also not in compliance with the regulator’s cybersecurity and virtual currency regulations, according to the NYDFS.

We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers, We remain proud to offer a more accessible, lower-cost platform to buy and sell crypto and are excited to continue to grow our business in a responsible manner with new products and services that our customers want.

Cheryl Crumpton, Robinhood’s Associate General Counsel of Litigation and Regulatory Enforcement

The settlement with Robinhood is the first enforcement action by New York’s Department of Financial Services in relation to the cryptocurrency sector, and given the fact that New York is recognized as a leading financial center, the Department has a large role in regulating and enforcing the financial sector. The announcement is also coming at a time when its new superintendent, Adrienne A. Harris, is trying to provide more guidance for the crypto industry as well as expand the regulator’s team of experts on virtual currencies.

DFS will continue to investigate and take action when any licensee violates the law or the Department’s regulations, which are critical to protecting consumers and ensuring the safety and soundness of the institutions.

Adrienne A. Harris, Superintendent of the New York State Department of Financial Services

Announcing in June that the SEC would be revamping trading rules that could threaten parts of Robinhood’s business model, Gary Gensler, the chairman of the SEC, has also led Robinhood to find itself on a collision course with regulators.


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