Robinhood has been fined $30 million by New York's top financial regulators over alleged shortcomings in the company's anti-money laundering and cybersecurity practices.
The New York Department of Financial Services said Tuesday that Robinhood's crypto subsidiary had "significant failures" in complying with state financial regulations and will be required to retain an independent consultant along with paying the fine.
“As its business grew, Robinhood Crypto failed to invest the proper 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 DFS Superintendent Adrienne Harris in a press release.
Robinhood is one of 31 companies that hold a BitLicense or trust charter required in New York state to facilitate cryptocurrency transactions. The company first disclosed the investigation and potential fine in a regulatory filing with the Securities and Exchange Commission last year.
"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," said Cheryl Crumpton, Robinhood's associate general counsel of litigation and regulatory enforcement, in an email Tuesday. "We remain proud to offer a more accessible, lower-cost platform to buy and sell crypto and are excited to continue to grow our business in a responsible manner with new products and services that our customers want.”
The New York DFS said a supervisory exam and subsequent investigation found deficiencies in Robinhood's anti-money laundering and cybersecurity program that were driven in part by a lack of dedicated resources, a problem exacerbated by the company's rapid growth. The company also failed to maintain a dedicated phone number for customer complaints on its website, in violation of New York's consumer protection requirements.
Robinhood Crypto has seen management turnover this year, including COO Christine Brown and Benjamin Melnicki, the unit's chief compliance officer. Both had been in their roles less than a year.
Launched in 2015, the BitLicense is generally regarded as the strictest and most thorough state regulation for cryptocurrency — and is often criticized within the industry. Harris, who has led the state DFS since August 2021, has pledged to speed up reviews for the license and release more industry guidance.
While leaders within the crypto industry would mostly support those efforts, Harris has also pledged to closely watch how licensed firms operate within New York.
"DFS will continue to investigate and take action when any licensee violates the law or the department’s regulations, which are critical to protecting consumers and ensuring the safety and soundness of the institutions,” Harris said.