Genesis Global Trading Faces $8 Million Penalty and BitLicense Revocation Over Compliance Failures, Cybersecurity Concerns

Genesis Global Trading, a virtual currency brokerage firm, is set to pay an $8 million penalty imposed by the New York State Department of Financial Services (NYDFS) over alleged compliance failures, leaving the company susceptible to illicit activities and cybersecurity threats. The NYDFS announced the settlement in a press release on Friday, revealing that Genesis Global Trading is currently in the process of winding down its operations, a year after other Genesis businesses filed for bankruptcy within a restructuring plan.

The regulatory action stems from Genesis obtaining its BitLicense from the NYDFS in 2018. Subsequently, between 2018 and 2019, the NYDFS conducted a comprehensive examination of the firm, uncovering deficiencies in its overall compliance function. A subsequent examination covering the period from 2019 to 2022 revealed that minimal effort or resources were directed towards addressing the previously identified deficiencies, despite the company's growth during that time.

As a result, the NYDFS initiated an enforcement investigation, which exposed Genesis Global Trading's failure to meet required standards in Bank Secrecy Act/anti-money laundering (BSA/AML) compliance, transaction monitoring, suspicious activity report filings, Office of Foreign Assets Control screening, and cybersecurity.

Adrienne Harris, NYDFS Superintendent, emphasized the severity of Genesis Global Trading's non-compliance, stating, "Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for the department’s regulatory requirements and exposed the company and its customers to potential threats."

Specific compliance issues cited by the NYDFS include the failure of policies, procedures, and processes to keep pace with the company's growth, a delay in conducting a firm-wide risk assessment until 2022, an informal appointment of a BSA/AML officer through email without adequate resourcing, neglecting enhanced screening of employees and third-party service providers for potential sanctions violations, and cybersecurity risk assessments lacking identification of areas requiring improvement, updating, or redesign.

Despite the regulatory action, the NYDFS acknowledged the firm's cooperation and remedial efforts to update its BSA/AML and cybersecurity programs. The settlement mandates Genesis Global Trading to surrender its BitLicense, which permits virtual currency business activities in New York. This development underscores the regulatory focus on ensuring robust compliance frameworks within the cryptocurrency industry to mitigate risks associated with illicit activities and cybersecurity threats.

By fLEXI tEAM