Robinhood Financial LLC and Robinhood Securities, LLC · Governance finding · severity 4 of 5
Per FINRA's March 2025 letter of acceptance, waiver and consent, Robinhood Financial approved about 14 million new accounts between November 2018 and August 2020 through a "largely automated customer identification process" that sometimes approved accounts despite identity discrepancies and red flags of identity theft. A 2020 review of the CIP source code found "unreasonable parameters for approving accounts"; a 2021 lookback flagged about two million accounts for further review and Robinhood closed more than 100,000 it could not verify. Robinhood Financial and Robinhood Securities were censured and fined $26 million, jointly, for these and other AML and supervisory failures, and Robinhood Financial was ordered to pay $3.75 million in restitution for a separate order-collaring issue, without admitting or denying the findings. FINRA described an automated process, not AI.
Record last reviewed Oct 21, 2026 · Markdown
Date
Mar 6, 2025 · disclosed Mar 7, 2025
Country
United States
AI system
Largely automated customer identification (CIP) process combining identity-vendor results with approval rules
AI?
Automated system not described as AI
The system was automated, but neither the institution nor a regulator described it as AI; it is listed because it is routinely discussed as an AI failure.
Category
Status
Settled
Severity
4 of 5
Impact
$26 million fine (all findings) plus $3.75 million restitution for the separate collaring issue · ≈ $26 million · About 14 million accounts approved through the automated process; about two million flagged in the lookback; more than 100,000 closed · Several thousand accounts were opened with stolen identities and used for suspicious trading, per the AWC. FINRA did not attribute a loss figure to the CIP failure.
What happened?
FINRA found that between November 2018 and August 2020 Robinhood Financial (RHF) "approved the opening of approximately 14 million new customer accounts, relying on a largely automated customer identification process that, due to its unreasonable design, sometimes approved accounts" where vendor data did not reasonably verify the customer's identity or showed possible identity fraud. For example, the automated process treated certain discrepancies flagged by the primary identity-verification vendor as "resolved" if the customer linked a bank account.[1]
In early 2019 RHF added a second identity-verification vendor, and FINRA found that the firm's "logic for evaluating the data provided by the second vendor caused the firm to approve new customer accounts in spite of material discrepancies and red flags of identity theft", such as names that did not match the Social Security number provided. In the third quarter of 2020 RHF commissioned a review of its CIP source code, which identified "certain unreasonable parameters for approving accounts in its automated customer identification process". RHF changed its CIP in January 2021 and did not remediate all identified issues until November 2021.[1]
During a 2021 lookback RHF identified about two million accounts needing further review and closed more than 100,000 after concluding it could not reasonably verify the customers' identities. It also self-disclosed that unknown actors had opened several thousand accounts with stolen identities and used them for suspicious trading. FINRA had already found, in a June 2021 AWC, that RHF lacked a reasonably designed customer identification program from June 2016 to November 2018.[1]
The same March 2025 AWC covered other failures: AML programs that did not detect or report suspicious activity, including account takeovers and suspicious money movements; inadequate disclosures about "collaring" market orders; supervision of Robinhood Securities' clearing technology; influencer communications; and reporting obligations. FINRA's news release said Robinhood Financial's CIP failure "resulted in the firm opening thousands of accounts when it had not reasonably verified the customer's identity."[1][2]
When did it happen?
- Nov 2018
Start of the period in which RHF approves about 14 million accounts through its largely automated customer identification process.[1]
- Aug 2020
End of the relevant CIP period; in the third quarter of 2020 RHF commissions a review of its CIP source code.[1]
- Jan 2021
RHF makes changes to its customer identification program.[1]
- Nov 2021
RHF finishes remediating the CIP issues and implements new vendors and strengthened identity-verification logic.[1]
- Mar 6, 2025
FINRA accepts the AWC: a censure and a $26 million joint fine for Robinhood Financial and Robinhood Securities.[1]
- Mar 7, 2025
FINRA announces the action, including $3.75 million in restitution from Robinhood Financial.[2]
What was the impact?
- Financial: $26 million fine (all findings) plus $3.75 million restitution for the separate collaring issue · ≈ $26 million[1][2]
- Customers: About 14 million accounts approved through the automated process; about two million flagged in the lookback; more than 100,000 closed[1][2]
- Other: Several thousand accounts were opened with stolen identities and used for suspicious trading, per the AWC. FINRA did not attribute a loss figure to the CIP failure.[1][2]
Severity 4 of 5: A FINRA censure with a $26 million fine and many customers affected: the automated customer-identification process covered about 14 million new accounts, and a later lookback led Robinhood to close more than 100,000 accounts it could not verify.
How did Robinhood Financial LLC and Robinhood Securities, LLC respond?
In a corrective action statement attached to the AWC, Robinhood said that in November 2021 RHF "implemented new vendors and strengthened logic for identity verification" and "re-verified the identities of certain customers who had been approved based on previous automated processes", and that it had implemented all recommendations of the independent compliance consultant appointed after the 2021 AWC. Robinhood accepted the findings without admitting or denying them.[1]
What was the outcome, and did regulators act?
Robinhood Financial and Robinhood Securities were censured and fined $26 million, jointly and severally; Robinhood Financial was ordered to pay $3,751,578.12 plus interest in restitution to customers affected by order collaring, and Robinhood Securities $5,807. FINRA agreed not to bring further actions on the same factual findings.[1][2]
What did FINRA find about Robinhood's identity checks?
FINRA found that from November 2018 to August 2020 Robinhood Financial approved about 14 million accounts through a largely automated customer identification process that sometimes approved accounts despite identity discrepancies or signs of identity theft, and that a review of its source code found unreasonable approval parameters.
How much was Robinhood fined in March 2025?
FINRA censured Robinhood Financial and Robinhood Securities and fined them $26 million jointly for the identity-check, AML, supervision and reporting failures. Separately, Robinhood Financial was ordered to pay about $3.75 million in restitution to customers whose market orders were collared and cancelled.
Was Robinhood's account-approval system AI?
FINRA did not describe it as AI. The AWC refers to a largely automated customer identification process, vendor data and approval logic, and a source-code review of its approval parameters. This record therefore classes it as an automated, rules-based system rather than artificial intelligence.
What did Robinhood change?
In its corrective action statement Robinhood said it implemented new identity vendors and strengthened verification logic in November 2021, re-verified customers approved under the earlier automated processes, closed accounts it could not verify, and implemented all of an independent consultant's recommendations.
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