Block Inc. Fined $40 Million by New York for Lapses in Anti-Money Laundering Compliance

Block Inc., the parent company of Cash App, has been hit with a $40 million penalty by the New York Department of Financial Services (NYDFS) for allegedly failing to properly report suspicious financial activity. This fine adds to a growing list of regulatory actions targeting the company in recent months.

Cash App, a widely used peer-to-peer payment platform, enables users to transfer both cash and cryptocurrencies like Bitcoin. As a money transfer service, it falls under the purview of the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations. These rules require financial institutions to scrutinize customers and transactions for signs of criminal activity and report any suspicious findings to authorities.

The NYDFS issued an enforcement order dated April 10, which identified “critical gaps” in Cash App’s AML program. According to the department’s findings, Block failed to conduct sufficient customer due diligence, lacked the necessary internal controls to curb money laundering, and did not monitor transactions in a timely fashion.

“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,” said Adrienne Harris, NYDFS superintendent, in a press release. Harris is also scheduled to speak at Compliance Week’s 20th Anniversary National Conference from April 28th to 30th.

This latest action from New York comes on the heels of similar penalties issued in January. At that time, 48 other U.S. states and the District of Columbia imposed an $80 million fine on Block, while the federal Consumer Financial Protection Bureau levied a $175 million penalty against the company.

The NYDFS pointed out that Cash App handled high-risk Bitcoin transactions with what it described as a “lax treatment,” particularly during 2019 and 2020, a time when Block experienced rapid growth. This expansion, the department said, left the company struggling to manage an increasingly complex flow of transactions.

“Compliance functions must keep pace with company growth or expansion,” Harris emphasized. “The rapid growth of Block’s Cash App absent a robust compliance function created risk and vulnerabilities that violated the rules financial services companies operating in New York must adhere to,” she added.

In addition to the financial penalty, the NYDFS order mandates that Cash App develop and implement a comprehensive compliance program. This program must be capable of detecting and preventing illicit activities, ensuring the protection of New York’s financial infrastructure. Furthermore, the company is required to appoint an independent monitor to supervise the development of the new compliance measures.

A Block spokesperson responded to the enforcement action in a statement released Thursday, saying, “This marks the resolution of all previously pending state money transmission license matters.” The spokesperson added, “Block did not admit to any of the department’s findings, and we are pleased to put this matter behind us. As the department has acknowledged, Cash App has devoted significant financial and other resources to compliance remediation and enhancements.”

By fLEXI tEAM