Robinhood’s Crypto arm fined $30 million for being non-compliant

Lavina Daryanani

The New York State Department of Financial Services has fined Robinhood’s crypto trading unit $30 million for alleged infringements of anti-money-laundering and cybersecurity regulations.

Per a WSJ report, NYDFS said Robinhood’s Bank Secrecy Act and anti-money-laundering compliance program was “insufficiently staffed” and “failed to transition in a timely manner” from a manual transaction monitoring system that was appropriate for the company’s size, transaction volumes, and customer profiles.

Alongside, Robinhood’s cybersecurity program also failed to address the company’s operational risks, and its policies weren’t in accordance with the regulator’s cybersecurity and virtual currency regulations, per NYDFS. Robinhood allegedly also did to comply with certain consumer-protection requirements by not having a dedicated phone number on its website to receive consumer complaints.

Revealing the crux of the consent order, WSJ noted,

“As part of the consent order, Robinhood also will be required to retain an independent consultant to evaluate its compliance with NYDFS’s regulations and its remediation efforts.”

WSJ’s report also revealed that the regulatory body discovered significant failures via a “supervisory exam” and through a subsequent “enforcement investigation” of the online brokerage firm. The failures have allegedly been a result of the company management’s oversight of its compliance programs.

By imposing this fine, the regulator has taken its first crypto-related enforcement action. This, notably, comes at a time when its new superintendent, Adrienne A. Harris, looks to provide more guidance for the crypto industry. Alongside, she also intends to expand the regulator’s virtual currency team.

Not a surprise: Robinhood knew that this was coming

Well, even though the order has just been passed, it is worth recalling that Robinhood was already expecting this turnaround. Last July, the company’s S-1 filings brought to light that the brokerage’s crypto division is under the bus for the same reasons.

Well, this is not the first time Robinhood has been non-compliant with regulations. In December 2020, the company paid the SEC $65 million payment to settle allegations that it had misled customers. And in June last year, the brokerage firm was fined $70 million by the Financial Industry Regulatory Authority for failing to protect customers.