New York’s Department of Financial Services (DFS) has levied a $30 million fine against the Robinhood financial services company for “significant violations” by its cryptocurrency division regarding state rules related to money laundering and cybersecurity.
The DFS faulted the California-based for inadequate staffing in its bank secrecy act/anti-money laundering program, failing to enact a “timely transition from a manual transaction monitoring system that was inadequate for RHC”™s size, customer profiles, and transaction volumes,” for not devoting “sufficient resources to adequately address risks specific” to the cryptocurrency division. to RHC. Additionally, the DFS faulted Robinhood”™s cybersecurity program for not addressing operational risks and for not being in compliance with the department”™s cybersecurity and virtual currency regulations.
In addition to the financial penalty, the company will be required to retain an independent consultant that will evaluate its compliance with DFS regulations.
“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,” said DFS Superintendent Adrienne A. Harris. “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 or the Department”™s regulations, which are critical to protecting consumers and ensuring the safety and soundness of the institutions.”
Robinhood provides a mobile app that enables commission-free trading of stocks, exchange-traded funds and cryptocurrencies. The company has been the source of multiple controversies and has previously fined $65 million by the U.S. Securities and Exchange Commission and $70 million by the Financial Industry Regulatory Authority for problematic operations. In January 2021, a class action lawsuit was filed against the company for intentionally restricting trading on GameStop stock.
Update: The Wall Street Journal reported Robinhood was eliminating approximately 23% of its workforce. While this action does not appear to be connected with the penalty levied by the DFS, this is the second time this year that the company enacted layoffs, following the April announcement that it was terminating 9% of its full-time employees. Between the two rounds, the company has cut more than 1,000 jobs this year.
