New York's Department of Financial Services claimed the company failed to police and stop money laundering on its mobile payment service Cash App, faulting gaps in the Bank Secrecy Act, AML and KYC programmes.
Block agreed in January to pay a USD 80 million civil fine to settle similar charges by 48 US state financial regulators. The agencies determined that the company had insufficient policies for money laundering through Cash App, its mobile payment service, without offering specifics about the shortcomings. Regulators noted that Block was not fully compliant with key requirements such as customer due diligence and high-risk account management, which could lead to its services being used for money laundering, financing terrorism, or other illegal activities.
The multi-statement settlement saw the fintech firm hire an independent consultant to review its practices and report back to the states within nine months on any deficiencies. Block had 12 months to correct any deficiencies found in the review after the report was filed. The company agreed to take corrective actions internally, according to the Conference of State Bank Supervisors, which announced the settlement.
In the current case, Block did not admit or deny wrongdoing, only mentioned that the New York settlement ends all previously pending state money transmission licence matters.
The New York regulator mentions that Block's alleged shortfalls include inadequate customer due diligence and inadequate risk-based controls to counter illegal activity, such as money laundering and terrorism financing. It also claimed that Block’s lax oversight of bitcoin transactions and its subsequent rapid growth created a vulnerable environment, susceptible to criminal exploitation. The regulator also cited Block's discovery in a 2022 internal investigation of 8,359 Cash App accounts linked to a Russian criminal network.
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