INSIGHT
The settlement in August 2022 between the New York State Department and Robinhood Crypto LLC (“RHC”), in which RHC agreed to pay a $30m civil penalty, once more highlights the importance of adequate investment to maintain effective compliance programs.
RHC’s trading platform allows customers to trade cryptocurrencies in virtual currency markets. RHC was required to maintain an effective anti-money laundering program and to devise and implement systems reasonably designed to identify and report suspicious activity and block illegal transactions. However, the Department’s investigation found that RHC had failed to maintain an effective program or comply with Cybersecurity Regulations.
Among the numerous weaknesses that led to this conclusion, the Department findings included:
- RHC’s approach to its compliance obligations substantially contributed to the deficiencies;
- The problems were exacerbated by a lack of prominence for compliance within the organizational structure (for example, the Chief Compliance Officer (CCO) reported to the Director of Product Operations rather than directly to a legal or compliance executive);
- The CCO did not participate in any formal reporting to the Board of Directors or independent audit or risk committees at the parent or affiliate.
- RHC did not have sufficient staff with the appropriate level of skills to support its compliance program, particularly given the size and pace of RHC’s growth.
Thus, RHC played no meaningful role in compliance efforts, resulting in a lack of an ability to influence staffing and resources, or to timely and adequately adopt measures that would assure full compliance with the Department’s Regulations.
The outcome sends a clear message to any organizations looking to cut corners on compliance, or to regard it as a formal or “tick the box” exercise. To do so is likely to prove very costly and trigger major business disruption and reputational damage. We would urge corporates to look at the compliance program as an investment in a sustainable future.
Our partner Consultancy, Exemplify can help design effective and risk- based compliance programs, nested in a culture which embraces compliance as vital to corporate sustainability. Their Fortune 100 experienced team is available to provide support in developing and strengthening your compliance program.
Please contact us to learn more about Exemplify’s services.
