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Cryptocurrency – Compliance Matters – Fin Tech – United States – mondaq.com



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July was a hot month for crypto enforcement, but August is off
to a hot start in its own right. On August 2, 2022, the New York
State Department of Financial Services (the “Department”)
issued a Consent Order with Robinhood’s crypto division for
failing to comply with state regulations governing money laundering
and cybersecurity. As a result, Robinhood Crypto will pay a $30
million penalty.

The NYSDFS Consent Order indicates that as a result of “a
safety and soundness examination,” serious deficiencies were
discovered, prompting an enforcement investigation into the various
compliance failures related to anti-money laundering,
cybersecurity, and virtual currency regulations. As Superintendent
of Financial Services, Adrienne A. Harris, described it in
announcing the penalty, “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.”

The Department claimed that two broad categories of
Robinhood’s crypto compliance regimen were lacking: (1) an
effective BSA/AML program with adequate transaction monitoring
systems; and (2) compliance with the Department’s Cybersecurity
Regulations. As the Consent Order puts it, the deficiencies were
“exacerbated by a lack of prominence” for Robinhood
Crypto compliance within the broader organization, and Robinhood
Crypto played no meaningful role in compliance efforts at the
entity level.” Simply put, the Department viewed Robinhood
Crypto’s compliance regimen as lagging way behind the growth of
the company.

This news comes on the heels of a recent SEC Complaint alleging
that a former Coinbase employee engaged in an insider trading
scheme involving nine cryptocurrency tokens listed on Coinbase. The
SEC Complaint was a significant enforcement event in the crypto
space because it was the first time the agency classified
cryptocurrencies as securities. It is yet to be seen what the SEC
Complaint means for those cryptocurrency issuers and the exchanges
that list those tokens for sale.

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Although the SEC Complaint grabbed may be the story of the
summer, the Consent Order involving Robinhood Crypto is a great
reminder that compliance matters.

Robinhood Crypto, LLC (“RHC”) will pay a $30 million
penalty to New York State for significant failures in the areas of
bank secrecy act/anti-money laundering (“BSA/AML”)
obligations

https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202

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