Administrators In New York Have Imposed A $30 Million Fine On Robinhood’s Crypto Division!
The regulators had claimed that Robinhood crypto did not use sufficient resources to Mitigate Financial Risks and imposed a $30 Million Fine on Robinhood’s crypto division.
Early this week, New York Financial Regulator imposed a fine of 30 Million USD as they believe the Robinhood Markets have violated consumer protection rules, cybersecurity, and anti-money laundering laws.
Administrators In New York Have Imposed A $30 Million Fine On Robinhood’s Crypto Division
NYDFS (New York State Department of Financial Services) had also announced that Robinhood Crypto did not have sufficient resources to mitigate the cybersecurity risks or address the compliance.
Robinhood Trading Application has been the center of attraction for various regulatory probes, including the recently sparked meme stocks bullish run.
- With the release of the announcement regarding the fine, the prices of Robinhood shares have dropped by 1 percent to 9 USD.
- In 2021, FINRA(Financial Industry Regulatory Authority) imposed a fine of USD 70 Million for not being able to protect its customer. This was the largest fine in history.
- Robinhood Firm had already predicted the New York Regulator would fine them USD 30 Million. This fine primarily focused on cyber security and antimoney laundering-related issues. It was found in the 2020 report that Robinhood had failed to comply with different regulatory requirements.
- In 2022 Q1, Robinhood has booked 25 percent of transaction-based revenue from cryptocurrencies.
- As per the Wall Street Journal, this is the first crypto enforcement Action taken under NYDFS against Robinhood trading firm.
Different Issues Related To Robinhood CyberSecurity And AML Program
Robinhood had no proper program to evaluate the suspicious transactions.
Robinhood Capital did not migrate from a manual system to an automated system to monitor the transactions. This is highly unacceptable when the number of transactions was approximately more than 100k with 5.3 million.
Robinhood’s compliance department was understaffed, and the remaining personnel lacked the necessary skills to support the BSA/AML compliance program.
There were numerous flaws in Robinhood’s approach to meeting the demand for transaction Monitoring programs and other compliance-related difficulties.
Robinhood Failed To Clear The Supervisory Exams
NYDFS has conducted different supervisory exams, and Robinhood failed in those exams; the failure is the result of the negligence of the Robinhood management regarding its compliance programs.
Robinhood had failed to foster and maintain sufficient resources to combat the cybersecurity flaws and anti-money laundering cases. Since the company has experienced good growth recently, it has exacerbated such problems.
In the Quarterly Filing, Robinhood has claimed that the monthly active users were approximately 16 Million. NYDS started the investigation in 2021 when Robinhood disclosed the number of active users. A year ago, paperwork was filed with the SEC regarding the same.
Robinhood’s cybersecurity policy wasn’t compliant with regulators and didn’t address operational concerns.
As a result, Robinhood must hire an independent consultant to assess all cybersecurity and anti-money laundering policies and practices to ensure compliance with NYDFS rules and recommend a remedy.