The New York State Department of Financial Services (NYDFS) has fined the cryptocurrency trading unit of online brokerage Robinhood $30 million for alleged violations of anti-money laundering (AML) and cybersecurity regulations, The Wall Street Journal (WSJ) reported Tuesday (Aug. 2).
The New York State financial regulator’s first crypto enforcement action said Robinhood Crypto “failed to maintain and certify compliant anti-money-laundering and cybersecurity programs,” per the report. Robinhood must also retain an independent consultant to evaluate its compliance.
Robinhood Crypto was found to have triggered “significant failures” based on the NYDFS’ supervisory exam and through a later enforcement investigation, the report stated, resulting in “shortcomings in the company’s management and oversight of its compliance programs,” including failures to maintain a culture of compliance or allocate resources to the programs, especially as the company grew quickly.
In its latest quarterly filing, Robinhood said it had about 15.9 million monthly active users as of the end of March. The company disclosed the NYDFS investigation and settlement last year in a Securities and Exchange Commission (SEC) filing, according to the report.
The NYDFS investigation found that Robinhood’s Bank Secrecy Act and AML compliance program was understaffed and didn’t move quickly enough from its manual transaction monitoring system. The company also didn’t have a dedicated phone number on its website for customer complaints, failing to comply with consumer protection requirements, the report stated.
“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,” said Robinhood Associate General Counsel of Litigation and Regulatory Enforcement Cheryl Crumpton in a statement Tuesday.
In June, reports surfaced that cryptocurrency exchange FTX could buy Robinhood as the company’s market value continued to drop.
The company saw its share price fall more than 80% in mid-June, with losses exceeding $3 billion since Robinhood went public in July 2021.
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