According to the detailed report of Wall Street Journal, the NYDFS found significant "failures" in managing Robinhood's compliance programs.
First, the NYDFS stated that Robinhood did not maintain enough staff to meet the rules under the Bank Secrecy and Anti-Money Laundering Act. Furthermore, the platform has failed to make proper upgrades to its transaction monitoring system to accommodate the growing size, trading volume and customer profile.
In addition, Robinhood is also accused of having followed policies that are inconsistent with NYDFS cryptocurrency and cybersecurity regulations. The regulator says Robinhood even lacks a dedicated contact phone line on its website for customer complaints, making user protection inadequate.
The NYDFS discovered these shortcomings as part of an investigation disclosed by Robinhood in a filing with the US Securities and Exchange Commission last year. Initially, the brokerage was expected to pay a $10 million penalty, but raised this expectation to $30 million in July 2021.
Overall, the latest agreement marks NYDFS's first enforcement action in the industry cryptocurrency. NYDFS Director Adrienne A. Harris said:
“DFS will continue to investigate and take action when any licensee violates a law or Department regulation, which is critical to protecting users and ensuring the safety and soundness of our devices. organization."
Interestingly, it seems that Robinhood will get rid of the "bad luck" in business from the beginning of 2022 until now when the CEO FTX Sam Bankman-Fried launched a "lifebuoy" to buy 7.6% shares of the company. However, very quickly, Sam Bankman-Fried denied the move was a step to take over the entire platform, so things with Robinhood were back on track.
In related developments, popular cryptocurrency exchanges Kraken was also recently investigated by the US Treasury Department for violating sanctions from the US. The ministry alleged that Kraken has served sanctioned Iranian users and is expected to hit a significant fine against the exchange.