New York’s top financial regulator has reached a $40 million settlement with Block, the financial services company, parent of Cash App, the digital wallet and financial platform.
This settlement comes in light of the company’s “serious compliance deficiencies” related to its anti-money laundering (AML) program and transaction monitoring processes.
Block’s Alleged Inability To Monitor Crypto Transactions
The New York State Department of Financial Services (NYDFS) reportedly identified several deficiencies within Block’s operations, some of which pertained to cryptocurrency transactions.
The department’s investigation alleged that Block created a “high-risk environment,” susceptible to exploitation by criminal actors. Notably, the company’s systems failed to adequately block Bitcoin (BTC) transactions linked to terrorism-related wallets until the exposure exceeded a threshold of 10%. Any interaction with such wallets is deemed illegal under US law.
The NYDFS examined Block’s practices from early 2021 to September 2022, concluding that the company was unable to keep pace with its rapid growth. This led to a failure in effectively monitoring and reporting transactions that could indicate money laundering or other illicit activities.
Block, co-founded by Jack Dorsey, did not admit to the findings of the NYDFS but expressed relief at resolving the matter. In a statement, the company acknowledged the efforts it has made to enhance its compliance measures, asserting that it is committed to promoting a safe financial environment.
“As the department has acknowledged, Cash App has devoted significant financial and other resources to compliance remediation and enhancements,” the firm stated. “We share the department’s dedication to addressing industry challenges.”
Former Employees Allegations
The settlement details align with previous reports from NBC News, which highlighted allegations from former Block employees claiming that the company’s compliance systems were fundamentally flawed.
These employees alleged that Block processed numerous cryptocurrency transactions for terrorist groups and failed to rectify compliance breaches when they were flagged.
Additionally, it was reported that the firm’s other unit, Square, had processed “thousands of transactions” involving countries under US economic sanctions, including Cuba, Iran, Russia, and Venezuela, as recently as 2023.
As part of the settlement, Block has agreed to appoint an independent monitor for one year, selected by the NYDFS, to evaluate the effectiveness of its AML and sanctions programs. The monitor will oversee necessary remedial actions and report findings back to the regulatory body.
The consent order makes it clear that while the company has settled with the NYDFS, it does not prevent any federal or other state agencies, or law enforcement authorities, from pursuing their own investigations or actions regarding the matter.
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