Block will pay a $40 million penalty to New York regulators due to “significant failures” in its anti-money laundering program and compliance issues with virtual currency on its Cash App platform.
Since 2013, Block has been licensed by the New York Department of Financial Services to conduct money transmission in the state and has been operating virtual currency services through Cash App since 2018. However, a regulatory investigation uncovered “critical gaps” in the company’s Bank Secrecy Act/Anti-Money Laundering compliance, including inadequate customer due diligence, insufficient risk-based controls, and failures in effectively and timely monitoring transactions.
The regulator criticized Block for its insufficient handling of high-risk Bitcoin transactions, which allowed largely anonymous transfers to occur without proper scrutiny. Furthermore, the company’s rapid growth between 2019 and 2020 led to a significant backlog of transaction alerts that remained unaddressed for an extended period.
In addition to the fine, Block will appoint an independent monitor to assess its compliance with the department’s regulations and its efforts to remedy these issues.
Adrienne Harris, Superintendent of Financial Services, emphasized the importance of compliance functions keeping pace with company growth, stating, “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.”