Block will pay a $40 million penalty to New York regulators for "significant failures" in anti-money laundering programme and virtual currency compliance failures on its Cash App platform.
Block has been licensed by the New York Department of Financial Services to conduct money transmission business in the state since 2013, and virtual currency business through Cash App since 2018.
However, an investigation from the regulator found "critical gaps" in the company's Bank Secrecy Act/Anti-Money Laundering programme, including inadequate customer due diligence, failure to implement sufficient risk-based controls, and failure to effectively and timely monitor transactions.
The watchdog has highlighted Block’s "lax treatment" of high-risk Bitcoin transactions, which allowed largely anonymous transfers to proceed without proper scrutiny. Additionally, rapid growth between 2019 and 2020 contributed to a severe transaction alert backlog, which Block left unaddressed for a significant period of time.
In addition to paying the fine, Block will retain an independent monitor to perform an evaluation of its compliance with the department’s regulations and its remediation efforts.
Superintendent of Financial Services, Adrienne Harris, says: “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."