Jack Dorsey’s Block to Pay $40M Fine for AML Violations

The New York State Department of Financial Services (DFS) has imposed a $40 million fine on Block (formerly known as Square), the parent company of the payment platform Cash App, for failing to adhere to its Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance program.

According to a press release from the DFS, Block also violated the agency’s money transmitter and cryptocurrency regulations.

U.S. Gov. Fines Block $40M

The DFS stated that the financial services company neglected critical gaps in its BSA and AML programs. The gaps included failure to apply sufficient risk-based controls to prevent money laundering and illicit activity, inadequate customer due diligence, and failure to monitor transactions.

Per the DFS announcement, Block’s lax treatment of high-risk Bitcoin transactions enabled anonymous transfers to proceed without adequate examination. The firm’s rapid growth between 2019 and 2020 led to a severe transaction alert backlog that remained unattended for a long period. 

Superintendent of Financial Services Adrienne A. Harris commented on the settlement:

“Compliance functions must keep pace with company growth or expansion. The rapid growth of Block’s Cash App, absent a robust compliance function, created risks and vulnerabilities that violated the rules financial services companies operating in New York must adhere to. The Department is taking decisive steps to ensure accountability, including the appointment of an independent monitor to oversee corrective measures.”

Block to Install Independent Monitor

Although U.S. authorities have licensed Block to conduct money transmission business since 2013 and Cash App since 2018, the DFS insists the company has created an environment “vulnerable to criminal exploitation.” Therefore, to prevent this from continuing, Block is required to retain an independent monitor who will evaluate its compliance with the DFS regulations. 

The installation of an independent monitor will also ensure that Block implements an effective compliance program that identifies and prevents illegal activities. This is part of the $40 million settlement.

It is worth noting that Block cooperated with the DFS throughout the investigation and has already made significant financial commitments to remediate its shortcomings.

“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,” added Superintendent Harris.