Robinhood, a prominent U.S. trading platform, has agreed to pay a $45 million penalty following an investigation by the Securities and Exchange Commission (SEC) into anti-money laundering (AML) and regulatory compliance failures.

The SEC revealed on January 13 that two of Robinhood’s broker-dealer units reached a settlement involving a combined civil penalty. Robinhood Securities will pay $33.5 million, while Robinhood Financial will contribute $11.5 million. Both units have committed to conducting an internal compliance audit as part of the resolution.
The SEC’s filing outlined a range of deficiencies, including significant delays in handling suspicious activity reports (SARs). Despite company policy mandating reviews within 45 days, Robinhood’s average filing time for SARs was 198 days by the end of 2020. This backlog was eventually reduced to 144 days by mid-2021 and 125 days by the end of that year. Robinhood fully resolved the issue by mid-2022.
“From January 2020 to March 2022, Robinhood systematically failed to initiate timely reviews of potentially suspicious transactions, complete reviews within a reasonable time, and file SARs promptly,” the SEC stated in its announcement.
The SEC emphasized that Robinhood’s compliance challenges were exacerbated by the platform’s rapid growth. The number of customer accounts surged from 5 million in 2019 to nearly 23 million by 2021, but the company’s AML program did not scale adequately to meet this increased demand.
“However, [the businesses] did not update their AML program sufficiently to keep up with this growth,” the SEC noted.
Other regulatory violations highlighted by the SEC included unauthorized system access, off-channel communications, and failures in data retention practices, though most of these issues reportedly occurred before 2023.
Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, underscored the importance of broker-dealers adhering to legal obligations. “It is essential to protect investors and promote the integrity of our markets,” Wadhwa said. “Robinhood’s actions fell short of regulatory standards.”
In response to the SEC’s findings, Robinhood expressed satisfaction with the resolution. “We are pleased to resolve these matters,” said General Counsel Lucas Moskowitz. “As the SEC’s order acknowledges, most of these are historical matters that our broker-dealers have previously addressed.”
The settlement highlights the ongoing challenges faced by rapidly expanding financial platforms in maintaining robust compliance and regulatory practices.
By fLEXI tEAM
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