Crypto Exchange Settles NYDFS Findings of Compliance Program Deficiencies

A cryptocurrency exchange settled New York State Department of Financial Services ("NYDFS") charges for failing to establish a compliance program to satisfy (i) New York banking law and (ii) NYDFS virtual currency, money transmitter, transaction monitoring and cybersecurity regulations.

According to the Consent Order, NYDFS found deficiencies in the exchange's (i) Know Your Customer ("KYC") and Customer Due Diligence ("CDD") procedures, (ii) transaction monitoring system and (iii) OFAC screening program. NYDFS also found that the exchange failed to conduct an ongoing review of its AML program and its transaction monitoring system. NYDFS found that - even after remediation efforts - the exchange's compliance program remained inadequate because the exchange lacked the resources to handle the number of suspicious alerts generated. NYDFS said that the exchange had a backlog of more than 100,000 unreviewed transaction monitoring alerts and more than 14,000 instances of customers requiring enhanced due diligence.

To settle the charges, the exchange agreed to (i) a civil monetary penalty of $50 million, (ii) invest at least an additional $50 million to improve its compliance program, (iii) continue to consult with the independent monitor assigned to the exchange following the initial examination and (iv) fully cooperate with the terms set forth in the Consent Order.