Payment company Block (formerly known as Square, ticker: XYZ.N) has agreed to pay a $40 million civil penalty and hire an independent monitor to resolve allegations by the New York State Department of Financial Services (NYDFS) that its mobile payment service Cash App failed to implement effective anti-money laundering measures.
The NYDFS announced the penalty decision on Thursday, stating that Block had "key vulnerabilities" in compliance systems related to the Bank Secrecy Act, anti-money laundering (AML), and "customer due diligence" (KYC).
Block, led by Twitter co-founder Jack Dorsey and headquartered in Oakland, California, neither admitted nor denied the allegations but stated in a release that the settlement with New York State marks the end of "all pending state-level matters regarding money transmission licenses."
In January this year, Block had already agreed to pay a $80 million civil penalty to financial regulators in 48 U.S. states to resolve similar compliance allegations regarding anti-money laundering. The NYDFS noted that Block had issues including insufficient customer due diligence and weak risk control measures, failing to effectively prevent illegal activities including money laundering and terrorist financing.
Additionally, since 2018, Cash App has offered Bitcoin trading services, and Block's regulatory oversight of this business has been insufficient. In the context of rapid company expansion, this created an environment "easily exploited by criminals."
The regulatory body cited an internal investigation conducted by Block in 2022, which found that 8,359 Cash App accounts were linked to a Russian criminal network.
NYDFS Superintendent Adrienne Harris stated that fintech companies, like traditional financial institutions, must ensure that their compliance capabilities keep pace with business growth, especially in the rapidly evolving cryptocurrency platform sector.
