In the latest in a series of challenges the company is grappling with, Robinhood’s crypto division has been fined $30 million by the New York State Department of Financial Services. It is the first crypto-focused enforcement action by the regulator that imposed the multimillion-pound fine on Robinhood for violating government anti-money laundering and cybersecurity regulations. In its announcement, the Financial Services Department said that following a regulatory review, it found significant deficiencies in the company’s compliance programs.
Apparently, not enough people were working in Robinhood’s money laundering compliance program. The company also failed in the transition from a manual monitoring system, which is now inadequate as it is much larger than when it started. In addition, the department found that Robinhood’s cybersecurity program policies do not fully align with official cybersecurity and virtual currency regulations.
The New York regulator also mentioned that Robinhood had failed to properly certify compliance with the department’s transaction surveillance regulation and cybersecurity regulation. Because it didn’t fully comply with state cybersecurity rules, Robinhood broke the law by claiming compliance. Finally, the regulator said Robinhood failed to comply with consumer protection requirements by not maintaining (and displaying on its website) a separate phone number specifically for consumer complaints.
Superintendent of Financial Services Adrienne A. Harris said in a statement:
“As its business grew, Robinhood Crypto failed to invest the appropriate resources and attention to developing and maintaining 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 are licensed in New York State, 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 if a licensee violates the law or Departmental regulations that are critical to protecting consumers while ensuring the safety and soundness of institutions.”
Aside from paying $30 million, Robinhood must engage an independent consultant to assess whether it has taken the appropriate actions to correct its violations and deficiencies under the Settlement.
Robinhood also recently announced that it will lay off 23 percent of its workforce due to record inflation and the cryptocurrency crash. It is the second round of job cuts this year and will affect employees across all business units. This revelation came after Robinhood released its earnings for the second quarter of 2022, in which it posted a net loss of $295 million and announced a 1.9 million drop in monthly active users.
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https://www.engadget.com/new-york-robinhood-crypto-30-million-fine-052222544.html?src=rss New York regulators slap Robinhood’s crypto business with $30 million fine