- Block Inc. has agreed to a $40 million settlement over significant anti-money laundering compliance failures related to its Cash App platform
- The New York State Department of Financial Services found that inadequate customer identification procedures and transaction monitoring increased money laundering risks
- As part of the settlement, Block Inc. will appoint an independent monitor to oversee compliance improvements
Block Inc., the parent company of Cash App, has reached a $40 million settlement with the New York State Department of Financial Services (DFS) following an investigation that uncovered significant deficiencies in its anti-money laundering (AML) compliance program. The DFS determined that inadequate customer identification procedures and insufficient transaction monitoring heightened the risk of money laundering. In addition to the financial penalty, Block Inc. has been told to engage an independent monitor to assess and guide its compliance enhancements.
Investigation Uncovers Compliance Shortcomings
The DFS’s investigation revealed that Block’s Cash App platform lacked robust customer due diligence measures and failed to implement effective risk-based controls to prevent illicit activities. Notably, the platform’s handling of high-risk Bitcoin transactions allowed largely anonymous dealings to occur without adequate scrutiny. Furthermore, during a period of rapid growth between 2019 and 2020, Cash App accumulated a significant backlog of transaction alerts, which remained unaddressed for an extended time.
In a press release, Superintendent Adrienne A. Harris emphasized the necessity for financial institutions to maintain stringent compliance standards:
All financial institutions, whether traditional financial services companies or emerging cryptocurrency platforms, must adhere to rigorous standards that protect consumers and the integrity of the financial system.
She highlighted that the swift expansion of Cash App without a corresponding enhancement in compliance functions led to vulnerabilities, prompting decisive regulatory action.
Block Promises to Do Better
Under the terms of the settlement, Block is mandated to hire an independent monitor who will conduct a comprehensive evaluation of the company’s adherence to DFS regulations and oversee its remediation efforts. The DFS acknowledged Block’s cooperation during the investigation and noted the company’s commitment of significant resources toward addressing the identified compliance shortcomings.
Block has not commented on the settlement
