People wait in line for T-shirts at a pop-up kiosk for online brokerage Robinhood along Wall Street after the company went public in an IPO earlier in the day, July 29, 2021, in the city from New York.
Spencer Platt | Getty Images
New York State Department of Financial Services announced has issued a $30 million penalty against Robinhood’s crypto division on Tuesday.
NYDFS, the government arm responsible for regulating financial services and products, alleged that Robinhood Crypto’s cybersecurity and money laundering program was understaffed and under-resourced to address risks. He also alleged that Robinhood’s crypto division failed to make a timely transition from a manual transaction control system to one more suitable for its user size and transaction volume.
The $30 million penalty is the first enforcement of the NYDFS crypto sector. Robinhood said last year it expected to pay a $30 million settlement to NYDFS following a 2020 investigation focused on anti-money laundering and related cybersecurity issues.
The regulator claimed that Robinhood Crypto violated the law when, despite the alleged problems, it certified compliance with the department. Robinhood Crypto also allegedly breached consumer protection requirements when it failed to maintain a separate, dedicated phone number on its website for consumer complaints.
Robinhood Crypto will need to engage an independent consultant to assess its compliance with related regulations.
“As its business grew, Robinhood Crypto failed to invest adequate 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 NYDFS Superintendent Adrienne Harris..
The fine is the latest in a series of monetary penalties that regulators have imposed on Robinhood. In 2020, Robinhood paid $65 million to settle an SEC investigation into misleading customers. In 2021, the Financial Industry Regulatory Authority (FINRA) fined Robinhood $70 million for disruptions and misleading customers.
“We are pleased that the agreement in principle reached last year and previously disclosed in our public filings is now final,” said Cheryl Crumpton, associate general counsel for litigation and regulatory enforcement at Robinhood.
The company has made “significant progress” in building its legal, compliance and cybersecurity programs, Crumpton added.