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It is related to Robinhood crypto activities was in expansion, but has now been accused of a regulatory breach. The most recent regulatory concern revolved around the breach of anti-money laundering and cyber security rules.
A New York State department said Robinhood’s crypto unit had flouted certain regulations and was fined for it. Robinhood Markets Inc’s crypto arm has been fined $30 million by New York’s financial regulator.
In the first crypto-related enforcement, the New York State Department of Financial Services (NYDFS) had fined the online brokerage’s cryptocurrency trading subsidiary for violating cybersecurity standards and anti-money laundering rules.
According to the report, Robinhood Crypto LLC failed to maintain and certify anti-money laundering and cybersecurity guidelines. Under the terms of the consent order, the agency must now hire an outside consultant who will be responsible for reviewing how long the company has complied with the requirements imposed by NYDFS along with remedial efforts.
Supervisory Review Discovered Defective Crypto Trading Compliance
NYDFS through its oversight enforcement review uncovered significant failures. Through this examination it was revealed that the collapse was caused by deficiencies in the company’s management due to a lack of compliance programs.
Other shortcomings include the failure to cultivate and maintain a culture of compliance and the concurrent allocation of resources to programs. An enforcement investigation of Robinhood was conducted after the violations were discovered. The problems were further compounded as the company grew rapidly and was unable to manage the aforementioned aspects.
Cheryl Crumpton, Associate General Counsel of Litigation and Regulatory Enforcement of Robinhood, stated,
We have made significant progress in building industry-leading legal, compliance and cyber security programs and will continue to prioritize this work to better serve our clients.
Related reading | How the SEC Uncovered a $300 Million Crypto Pyramid Scheme
The fine imposed was not unforeseen
This penalty did not come as a surprise to Robinhood. According to statements made last year, Robinhood expected to be fined by the New York regulator.
The agency in its latest quarterly filing said it had nearly 15.9 million monthly active users as of the end of March and also publicly disclosed for the first time that the investigation and settlement with the NYDFS occurred a year ago.
According to Robinhood, he had expected to be fined at least $10 million. This estimated amount was submitted in documents provided to the Securities and Exchange Commission (SEC).
According to the company’s statements last year, the investigation conducted in the month of 2020 “focused primarily on anti-money laundering and cybersecurity-related problems,” which also revealed multiple violations of regulatory standards.
Although the estimated amount of the fine was $10 million, as Robinhood had taken into account, it rose to much more than that, ending up with a total of $30 million.
Related reading | Shiba Inu reveals the name of its new CCG game
Featured image from TIME, chart from TradingView.com
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