Incident Details
The Superintendent of the New York State Department of Financial Services (DFS), Adrienne A. Harris, has announced that Genesis Global Trading, Inc. has agreed to pay an $8 million penalty to the state for failing to comply with DFS's regulations on virtual currency and cybersecurity. This non-compliance made the company susceptible to illicit activities and cyber threats. Under Superintendent Harris' leadership, the Department has imposed penalties on virtual currency businesses for the first time, totaling over $140 million to ensure accountability. The DFS regulations on virtual currency and cybersecurity are renowned for their stringent standards that aim to protect consumers and financial institutions from malicious actors. Genesis Global Trading's lack of a robust compliance program demonstrated a disregard for the Department's regulations, jeopardizing the company and its clients. After conducting routine examinations and an enforcement investigation, the DFS found deficiencies in Genesis Global Trading's compliance with rules regarding Bank Secrecy Act/Anti-Money Laundering (BSA/AML), transaction monitoring, Suspicious Activity Report (SAR) filings, Office of Foreign Assets Control (OFAC) screening, and cybersecurity measures. It's important to note that Genesis Global Trading, Inc. is distinct from Genesis Global Capital, LLC, and is the only Genesis entity licensed by the Department that was not involved in the Gemini Earn program. The DFS remains at the forefront of regulating virtual currency, collaborating with regulators globally to establish effective regulatory frameworks based on the Department's expertise. Superintendent Harris' VOLT initiative has bolstered the Department's oversight capabilities by adding over 60 specialists in licensing, including experts in BSA/AML laws, accounting oversight, financial crimes, data governance, and cybersecurity. The Department has improved existing policies, introduced new procedures, and granted new assessment powers to support the growth of the virtual currency sector. To address emerging challenges, the DFS has issued eight innovative regulatory guidance documents, such as criteria for USD-backed stablecoins, customer protection in virtual currency insolvency cases, and recommendations for blockchain analytics tools usage. Under Superintendent Harris, the DFS has taken supervisory and enforcement actions against cryptocurrency firms, including landmark cases with Binance, Paxos, and Coinbase. Genesis Global Trading obtained a BitLicense from the Department in 2018 to operate in New York, and as part of the settlement, it will relinquish the license and wind down its operations. For more details on the consent order with Genesis Global Trading, visit the DFS website.
Incident
How Did the Breach Happen?
Genesis Global Trading, Inc. experienced a breach as a result of shortcomings in compliance with regulations. The firm did not adhere to the necessary criteria in Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, monitoring transactions, submitting Suspicious Activity Reports (SARs), conducting screenings against the Office of Foreign Assets Control (OFAC), and maintaining cybersecurity standards.
What Data has been Compromised?
The reference material does not contain details regarding the data that was compromised during the security breach.
Why Did the company's Security Measures Fail?
The lack of a well-maintained compliance program led to the breakdown of the company's security protocols, showing a failure to adhere to the Department's regulations and putting both the company and its clients at risk of potential harm.
What Immediate Impact Did the Breach Have on the company?
The reference material does not specify the immediate consequences of the breach.
How could this have been prevented?
Genesis Global Trading could have avoided this breach by ensuring they had an effective compliance program in place that adhered to the necessary standards in BSA/AML compliance, transaction monitoring, SAR filings, OFAC screening, and cybersecurity protocols.
What have we learned from this data breach?
This incident has highlighted the significance of upholding a robust compliance program and adhering to regulatory standards as essential measures to safeguard against unauthorized activities and cyber threats.
Summary of Coverage
Genesis Global Trading, Inc. has incurred an $8 million penalty from the New York State Department of Financial Services (DFS) for not meeting virtual currency and cybersecurity regulations, leading to compliance issues. The company's inadequate compliance program resulted in a failure of security protocols. This incident emphasized the importance for companies to adhere to prescribed guidelines regarding compliance, transaction monitoring, SAR filings, OFAC screening, and cybersecurity measures.