## Block Faces $40 Million Fine for Cash App Oversight Issues
Block, the cryptocurrency company behind Cash App, has been hit with a $40 million fine by New York’s financial regulator due to shortcomings in monitoring and preventing money laundering on its platform. Formerly known as Square, Block is co-founded by Jack Dorsey. The New York Department of Financial Services (DFS) highlighted several issues, including flaws in money laundering prevention, gaps in know-your-customer protocols, and concerns related to the Bank Secrecy Act. Earlier this year, the company also agreed to pay $80 million in fines to various states for similar compliance issues.
The DFS pointed out that Block lacked sufficient risk assessments concerning the nature of its transactions, which created opportunities for illegal activities, including potential terrorism funding. Since Cash App began facilitating Bitcoin transactions in 2018, the DFS has noted that the company did not implement adequate oversight to monitor the types of transactions being processed. The platform has seen significant growth during this period, making it particularly susceptible to money laundering activities.
As part of the resolution, Block has been instructed to seek external assistance to enhance its transaction monitoring on Cash App and improve overall service quality. The DFS concluded that Block maintained lax transaction standards, resulting in the regular processing of anonymous transactions. A spokesperson for Block stated, “This marks the resolution of all previously pending state money transmission license matters. The department has acknowledged that Cash App has devoted significant financial and other resources to compliance remediation and enhancements. We share the department’s dedication to addressing industry challenges and remain committed to investing across our operations to help promote a safe and healthy financial system.”
Adrienne Harris, the DFS superintendent, announced the $40 million fine against Block, citing deficiencies in its anti-money laundering procedures and virtual currency compliance. The fines specifically pertain to the Cash App platform. Harris emphasized that the company did not adequately monitor transactions and lacked proper customer identification procedures. As part of the settlement, Block is required to hire an external monitor to assist in addressing these issues.
The rapid growth of the company has led to a significant backlog of compliance issues. Block has responded to the allegations, expressing disagreement with the verdict but a commitment to enhancing their services. The DFS reported that between 2018 and 2021, Cash App accumulated a substantial number of backlogs, with the number of logs exceeding 169,000 in 2020. Response times were notably poor, with some alerts taking over a year for Cash App to address. Additionally, the DFS raised concerns regarding Block’s transaction labeling practices, noting that transactions associated with mixers were categorized as medium risk, while the DFS believes they should be classified as high risk.
