The digital payments company co-founded by Jack Dorsey has settled with the New York state financial regulator amid alleged compliance issues with its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program.
In a statement, the New York Department of Financial Services (NYDFS) says that Block committed lapses with how it operated Cash App, the firm’s peer-to-peer money transmission service that began offering Bitcoin (BTC) transactions in 2018.
Investigations carried out by the regulator reveal Block’s alleged shortcomings in its customer due diligence practices and failure to implement controls to prevent anti-money laundering and other illicit activities.
The company also allegedly failed to promptly address severe transaction alert backlogs, largely due to rapid growth between 2019 and 2020.
The regulator says that Block’s lax treatment of high-risk Bitcoin transactions enabled anonymous transactions to push through without proper scrutiny.
Reads the government agency’s consent order,
“The AML program run by Block, which governs both fiat and Bitcoin transactions on the Cash App platform, failed to adequately consider the substantial risks posed to an entity of its new size and complexity.”
The terms of the settlement require Block to pay $40 million in penalties and engage the services of an independent monitor to evaluate its compliance with regulations and remediation efforts.
Says Superintendent of Financial Services Adrienne A. Harris,
“Compliance functions must keep pace with company growth or expansion. 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.”
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