Robinhood’s Crypto Department Got Fined For Violations; Here’s What We Know
Robinhood’s crypto related activities have been on an expansion but it has now been charged with regulatory violation. The recent-most regulatory concern was surrounded around violating anti-money laundering and cybersecurity rules.
A New York State department stated that the crypto unit of Robinhood had defied certain regulations and was penalised for it. The Robinhood Markets Inc’s crypto wing was 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 imposed a fine on the cryptocurrency trading subsidiary of online brokerage owing to breach of cybersecurity standards and anti-money laundering rules.
According to the report, Robinhood Crypto LLC was unsuccessful in maintaining and certifying anti-money laundering and cybersecurity guideline. According to the terms of the consent order, the organisation will now need to hire an outside consultant who will be responsible in reviewing the length till which the company complied with the requirements that were imposed by the NYDFS along with remedial efforts.
Supervisory Exam Discovered Faulty Crypto Trading Compliance
NYDFS through supervisory enforcement examination uncovered considerable failures. Through this examination it was revealed the collapse was caused by shortcomings within the company’s management due to lack of compliance programs.
The other shortcomings include failure in fostering and maintaining a culture of compliance and simultaneously allocate resources to the programs. An enforcement investigation of Robinhood was carried out after the violations were discovered. The problems had aggravated further has the company grew rapidly unable to manage the aforementioned aspects.
Cheryl Crumpton, Associate General Counsel of Litigation and Regulatory Enforcement of Robinhood, had stated,
We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers.
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The Fine Imposed Was Not Unanticipated
This penalty didn’t look unexpected to Robinhood. According to the statements which were made last year, Robinhood was expecting to receive a fine from the New York regulator.
The organisation in its latest quarterly filing mentioned that it had close to 15.9 million monthly active users as of March end and also publicly disclosed for the first time that the investigation and the settlement with the NYDFS which happened a year ago.
According to Robinhood, it had anticipated to receive a penalty of $10 million at the least. This estimated figure was submitted on the paperwork provided to the Securities And Exchange Commission (SEC).
As per the statements of the company last year, the investigation carried out in the month of 2020 had “focused primarily on anti-money laundering and cybersecurity-related problems” which also unravelled multiple violations of regulatory standards.
Although the estimated amount of the fine was $10 million as Robinhood had taken into account, it rose to be way more than that and resulted in a total of $30 million.
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Featured image from TIME, chart from TradingView.com