Block, the financial services firm behind the popular peer-to-peer payments platform Cash App, has been fined $40m by the New York State DFS for significant AML and virtual currency compliance failures.
According to FSTech, the penalty follows a DFS investigation that uncovered multiple lapses in Block’s AML programme and its handling of cryptocurrency transactions via Cash App. Block, which has been authorised to conduct money transmission in New York since 2013 and virtual currency business since 2018, was found to have failed in maintaining adequate risk controls and transaction monitoring systems.
DFS superintendent Adrienne A. Harris said the fine was a response to “serious deficiencies” in Block’s compliance procedures. These included poor customer due diligence, insufficient risk-based controls to prevent illicit activities, and delays in reviewing suspicious transactions. Particularly concerning was the platform’s facilitation of high-risk Bitcoin transactions, many of which occurred without adequate scrutiny, allowing potentially anonymous transfers to proceed.
The Department stated that Block’s rapid growth between 2019 and 2020 exacerbated these problems. A significant backlog of suspicious activity reports went unaddressed for an extended period, creating vulnerabilities that could be exploited for money laundering. DFS noted that this lack of adequate oversight compromised the integrity of the financial system.
“The rapid growth of Block’s Cash App absent a robust compliance function created risk and vulnerabilities that violated the rules financial services companies operating in New York must adhere to,” Harris said.
As part of the settlement, Block will not only pay the $40m penalty but must also retain an independent monitor. This external oversight will help ensure the company implements effective improvements and remains compliant with the Department’s regulations going forward.
Harris stressed the importance of aligning compliance functions with business expansion. “All financial institutions, whether traditional financial services companies or emerging cryptocurrency platforms, must adhere to strict standards that protect consumers and the integrity of the financial system,” she added.
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