New York state’s top financial regulator struck a $40 million settlement Thursday with Block Inc., the parent of Cash App, the popular money transmission service, after having found the company had “serious compliance deficiencies” related to its anti-money laundering program and transaction monitoring processes.
The deficiencies at Block, some involving cryptocurrencies, “created a high-risk environment vulnerable to exploitation by criminal actors,” the New York State Department of Financial Services said in the consent order, noting, for example, that Block’s system did not trigger blocks on bitcoin transactions involving terrorism-connected wallets until that exposure exceeded 10%.
Any exposure to terrorism-connected wallets is illegal, the department said.
The New York regulator examined Block’s practices from early 2021 to September 2022, concluding it did not keep pace with the significant growth it was experiencing. That resulted in Block’s “inability to fully comply with its obligation to effectively monitor, and thereafter report, the transactions being conducted on its platforms for suspected money laundering and other illicit criminal activity.”
Block, which did not admit to the department’s findings, said it was pleased to put the matter behind it.
“As the department has acknowledged, Cash App has devoted significant financial and other resources to compliance remediation and enhancements,” it said in a statement. “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.”
Block was launched by Twitter co-founder Jack Dorsey, who lists his current title as Block Head and chairman.
The details in the settlement parallel exclusive reporting by NBC News last year detailing former Block employees’ allegations that the company’s compliance systems were deeply flawed.
According to the former employees, one of whom was also interviewed by federal prosecutors, Block processed multiple cryptocurrency transactions for terrorist groups and did not correct company processes when it was alerted to breaches. Block began offering bitcoin transactions through Cash App in 2018.
Square, another Block unit, processed thousands of transactions involving countries subject to economic sanctions, one of the former employees told NBC News. Documents the former employee provided showed transactions, many in small dollar amounts, involving entities in countries subject to U.S. sanctions restrictions — Cuba, Iran, Russia and Venezuela — as recently as 2023.
Under the terms of the settlement, Block agreed to bring on an independent monitor for a year, selected by the New York regulator, to conduct a comprehensive review of the effectiveness of its anti-money laundering and sanctions programs. The monitor will oversee remedial measures as needed, the consent order said, and report its findings to the regulators.
The consent order with the department “does not bind any federal or other state agency or any law enforcement authority,” it noted.