Block, Inc., the financial services company led by Jack Dorsey, will pay a $40 million penalty to the New York Department of Financial Services (NYDFS) over failures in its anti-money laundering and virtual currency compliance program, regulators announced Thursday.
The settlement follows an NYDFS investigation that found Block’s Cash App platform had critical deficiencies in customer due diligence, risk-based controls, and transaction monitoring.
These gaps, regulators said, left the platform vulnerable to criminal exploitation, particularly through largely anonymous Bitcoin (BTC) transactions that evaded proper scrutiny.
“Compliance functions must keep pace with company growth or expansion,” NYDFS Superintendent Adrienne A. Harris said. “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.”
Independent monitor
In addition to the fine, Block will be required to retain an independent monitor to oversee improvements to its compliance systems and ensure alignment with state regulatory standards.
The company has been licensed to conduct money transmission in New York since 2013 and has held a virtual currency license under the state’s BitLicense regime since 2018.
The enforcement action comes just months after Block paid $80 million to 48 state financial regulators over separate AML violations. According to the NYDFS, its latest probe revealed a backlog of unresolved transaction alerts between 2019 and 2020, which increased the risk of illicit financial activity on the platform.
Block cooperated with the NYDFS throughout the investigation and has already begun investing in compliance remediation.
The regulator’s consent order emphasizes that all financial institutions — crypto platforms included — must maintain effective controls to protect the integrity of the financial system.
