Robinhood’s Crypto Division Fined $30M By NY Financial Regulator

Robinhood’s crypto division was fined $30M by the New York Department of Financial Services (NYDFS).

Adrienne Harris, the superintendent stated that as its business grew, Robinhood Crypto failed to commit the resources and attention to build and sustain a culture of compliance.

The cryptocurrency division of Robinhood has been fined $30 million for allegedly breaking consumer protection, cybersecurity, and anti-money laundering regulations.

Robinhood Crypto will have to pay a $30 million fine to the state, according to a statement made on Tuesday by NYDFS Superintendent Adrienne Harris, for failures in the areas of bank secrecy act/anti-money laundering obligations as well as numerous cybersecurity failures that allegedly broke New York law. Harris claims that Robinhood’s cryptocurrency division will also be obliged to employ a third-party consultant to assess the company’s compliance and corrective action initiatives.

#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 Superintendent, Robinhood Crypto failed to devote the necessary time and resources in order to create and sustain a culture of compliance as its business grew. Harris also stated:

“The same anti-money laundering, consumer protection, and cybersecurity requirements that apply to traditional financial services organizations apply to all virtual currency companies regulated in New York State.”

In accordance with the terms of the consent agreement, the NYDFS claimed that between January and September 2019 it had discovered shortcomings in RHC’s compliance function across many areas. After determining that some BSA and AML standards had been broken by Robinhood’s crypto division, the NYDFS launched an enforcement inquiry.

Allegations that Robinhood Crypto violated these rules included not switching to a sufficiently large transaction monitoring system or “devoting sufficient resources to appropriately address concerns.” In addition, according to the NYDFS, Robinhood violated a supervisory agreement by failing “to maintain on its website a telephone line for the receipt of client complaints.”

Cheryl Crumpton, associate general counsel for litigation and regulatory enforcement at Robinhood, claimed that the company had a settlement in principle with the New York Department of Financial Services in 2021 and had disclosed the subject in its public disclosures. Robinhood made a lot of progress creating industry-leading legal, compliance, and cybersecurity programs, according to Crumpton.

The U.S. Financial Industry Regulatory Authority fined Robinhood over $70 million in June 2021 for allegedly harming thousands of users “widespread and significantly” and displaying “systematic supervisory deficiencies” beginning in September 2016.