New York Division of Monetary Companies Fines Robinhood

The New York Division of Monetary Companies (DFS) introduced its first ever penalty towards a cryptocurrency platform this week, with a whopping $30 million advantageous assessed towards Robinhood Crypto, LLC (RHC) for what it described as “vital failures within the areas of financial institution secrecy act/anti-money laundering obligations and cybersecurity that resulted in violations of the Division’s Digital Forex Regulation (23 NYCRR Half 200), Cash Transmitter Regulation (3 NYCRR Half 417), Transaction Monitoring Regulation (23 NYCRR Half 504), and Cybersecurity Regulation (23 NYCRR Half 500).

Following DFS’s supervisory examination and enforcement investigation, it discovered that RHC’s compliance program “didn’t absolutely handle RHC’s operational dangers, and particular insurance policies inside the program weren’t in full compliance with a number of provisions of the Division’s Cybersecurity and Digital Forex Laws.”

Specifically, all DFS-regulated entities should certify yearly that they’ve complied with DFS laws, together with its cybersecurity laws. In accordance with DFS, RHC licensed to DFS that it complied with the DFS Cybersecurity Laws. Nonetheless, DFS acknowledged in its press launch that “[D]espite these weaknesses in its transaction monitoring and cybersecurity applications, RHC improperly licensed compliance with the Division’s Transaction Monitoring Regulation and Cybersecurity Regulation. Pursuant to these laws, corporations ought to solely be certifying to DFS if their applications are absolutely compliant with the relevant regulation. In mild of this system’s deficiencies, RHC’s 2019 certifications to the Division testifying to compliance with these Laws mustn’t have been made and thus violated the legislation.”

Along with the financial penalty, the settlement requires RHC to be overseen by an impartial marketing consultant that may carry out “a complete analysis” of RHC’s compliance and remediation efforts in response to the violations recognized by DFS.

The found deficiencies and subsequent penalty are reminders to DFS-regulated entities that the annual certification to DFS can be scrutinized and enforced.

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