Block has been ordered to pay a total of $255 million by state regulators and the Consumer Financial Protection Bureau (CFPB) due to failures in anti-money laundering (AML) measures and fraud related to its Cash App.
In a coordinated enforcement action involving 48 state financial regulators, Block will face an $80 million fine and must take corrective measures for violating the Bank Secrecy Act (BSA) and AML regulations. Additionally, the CFPB has mandated that Block refund consumers up to $120 million and pay a $55 million penalty into its victims relief fund. Cash App, the mobile payment platform from Block, is used by over 50 million Americans for various financial transactions.
Under BSA/AML regulations, financial services companies are obligated to conduct due diligence on their customers, which includes identity verification, reporting suspicious activities, and implementing necessary controls for high-risk accounts. However, state regulators found Block non-compliant with certain regulations, increasing the risk that its services could be exploited for money laundering, terrorism financing, or other illegal activities.
As part of the settlement, Block will pay the $80 million fine to state agencies, engage an independent consultant to review its BSA/AML program, and submit a report within nine months. The company will then have one year to rectify any identified deficiencies.
The CFPB has also taken action, noting that the company “allowed fraud to proliferate” on Cash App and employed inadequate security measures that endangered users. While Block is legally required to investigate unauthorized transaction disputes, the CFPB criticized its investigations as “woefully incomplete.” The bureau reported that Block directed users affected by fraud to approach their banks for transaction reversals, only for Block to deny these claims later.
The CFPB’s statement indicated that Block used various tactics to discourage Cash App users from seeking assistance, thereby minimizing its costs. Beyond financial penalties, the CFPB has instructed Block to establish 24-hour, live customer service, ensure thorough investigations of unauthorized transactions, and deliver prompt refunds where applicable.
CFPB Director Rohit Chopra commented, “Cash App created the conditions for fraud to proliferate on its popular payment platform. When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused.”
The CFPB is also pursuing a case against Zelle, announcing last month that it has sued Early Warning Services, JPMorgan Chase, Bank of America, and Wells Fargo for allowing fraud to persist on the Zelle payment platform.