NYDFS, crypto payment company reach AML/cybersecurity settlement
On March 16, NYDFS issued a consent order against a payment service provider for allegedly failing to comply with the state’s virtual currency and cybersecurity regulations. The company was licensed to engage in virtual currency business activity in the state pursuant to 23 NYCRR Part 200. Licensees under Part 200 are required to, among other things, comply with federal and state laws mandating effective controls to guard against money laundering and certain other illegal activities. A 2022 NYDFS examination revealed that, although the company made improvements to address deficiencies within its AML and cybersecurity compliance programs that were identified during a 2018 examination, the programs still required additional improvements to achieve regulatory compliance. NYDFS concluded that the company violated sections of Part 200 by allegedly failing to develop adequate internal policies and controls to maintain compliance with applicable AML laws or to develop procedures to ensure compliance with necessary risk management requirements under applicable OFAC regulations. Furthermore, the company violated the state’s cybersecurity regulation (23 NYCRR Part 500) by failing to conduct periodic cybersecurity risk assessments and failing to timely appoint a designated chief information security officer responsible for overseeing, implementing, and reporting on the company’s cybersecurity program. Under the terms of the consent order, the company agreed to pay a $1 million civil monetary penalty and submit an action plan to NYDFS within 180 days detailing its remediation efforts. The company also agreed to conduct a comprehensive cybersecurity risk assessment within 150 days and to continue to strengthen its controls, policies, and procedures to prevent future violations.