Robinhood crypto unit expected to pay $30 million fine in anti-money laundering probe

Robinhood’s crypto unit is expected to pay a $30 million fine following an investigation by the New York Department of Financial Services (NYDFS) into its financial compliance and cybersecurity, according to a recently filed S-1.

“Robinhood Crypto and the New York Department of Financial Services have reached a settlement in principle regarding these charges, subject to final filings, under which Robinhood Crypto expects to, among other things, pay a monetary penalty of $30 million and hire an monitor,” the company said.

California-based Robinhood first disclosed the investigation when it filed documents to go public earlier this month, telling investors at the time that the proposed settlement with NYDFS would require Robinhood Crypto to hire a monitor and pay a fine of at least $10 million.

In July 2020, the New York Department of Financial Services said Robinhood’s crypto unit had a number of “matters requiring attention,” primarily focusing on anti-money laundering and cybersecurity-related issues.

A subsequent investigation by the New York Department of Financial Services’ Division of Consumer Protection and Financial Enforcement found that Robinhood allegedly violated anti-money laundering and New York banking law requirements, including failing to maintain and certify a compliant anti-money laundering program.

Other violations included cybersecurity and virtual currency requirements, the filing said, “including certain deficiencies in our policies and procedures with respect to risk assessment, the lack of adequate incident response and business continuity plans, and deficiencies in the security of our application development.”

This isn’t Robinhood’s first multimillion-dollar fine related to its business operations. In December, the company agreed to pay $65 million to settle with the SEC for misleading customers about its revenue sources and failing to fulfill its obligation to execute the best trades for its customers.

In June, Robinhood agreed to pay a $70 million fine to FINRA to resolve allegations that the company misled millions of customers, approved unqualified traders to pursue high-risk strategies, and had no oversight that prevented millions of people from trading.

The one-time fine Robinhood was ordered to pay totaled $165 million, or 32% of the company's first-quarter revenue of $522 million.

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Author: Amy Liu

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