By
Steve Muchoki
April 19th, 2024
NYDFS has charged Robinhood for failing to take sufficient compliance measures to address risks and other money-laundering issues.
On Tuesday, August 2, the New York State Department of Financial Services (NYDFS) announced a $30 million penalty for the crypto division of popular trading app Robinhood.
The penalty comes on the charges that Robinhood had inadequately staffed its Crypto’s anti-money laundering and cybersecurity program. NYDFS also stated that the company didn’t have sufficient resources to address risks.
Furthermore, is noted that the crypto wing of Robinhood failed to conduct a timely transition from a manual transaction monitoring system to a more efficient one while looking at its growing user size and transaction volumes.
NYDFS is responsible for regulating financial products and services in New York State. NYDFS doesn’t allow manual monitoring systems for businesses averaging more than 100,000 transactions a day. Speaking on the matter, NYDFS Superintendent Adrienne Harris, said:
“As its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance—a failure that resulted in significant violations of the Department’s anti-money laundering and cybersecurity regulations. All 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. DFS will continue to investigate and take action when any licensee violates the law.”
Overcoming Challenges
It seems that Robinhood was prepared for the fine from the New York authorities. The company recently said that it was expecting a $30 million payment settlement to NYDFS after a 2020 investigation owing to cybersecurity-related issues and anti-money laundering.
The $30 million is also one of the first crypto enforcements from NYDFS. It is also the latest in the slew of penalties that Robinhood has been facing. Back in 2020, Robinhood paid $65 million to settle a probe with the SEC over charges of misleading customers.
Last year in 2021, Robinhood paid $70 million in fine by the Financial Industry Regulatory Authority (FINRA) for several outages. Cheryl Crumpton, associate general counsel of litigation and regulatory enforcement at Robinhood said:
“We are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final”.
He further noted that Robinhood has made significant progress in building its cybersecurity, legal, and compliance programs.