Federal authorities are investigating significant compliance allegations against one of the world’s largest fintech companies. A former Block employee claims the company processed cryptocurrency transactions for terrorist groups, and that Square performed thousands of unreported transactions in countries under U.S. government sanctions.
Roughly 100 pages of documents were provided to back the former employee’s assertions. The whistleblower alleges Block has a far-reaching and longstanding history of compliance negligence. This culture of noncompliance is attributed directly to poor leadership and extends to both of Block’s brands, Square and Cash App.
“From the ground up, everything in the compliance section was flawed,” the former employee told NBC News. “It is led by people who should not be in charge of a regulated compliance program.”
Ignored Alerts
The foreign transactions included credit card transactions, dollar transfers, and bitcoin exchanges that were not reported to the government. These transactions, often in small amounts, were processed in countries like Russia, Iran, and Cuba, where they are prohibited by law.
The claims allege that Block’s leadership was made aware of these transfers but took no action. Even after the company received alerts flagging users in sanctioned countries, these users were allowed to operate unimpeded.
The nature of the Cash App platform was cited as an issue. Users typically don’t store money on the platform, and by the time Block employees were alerted to questionable transactions, the funds had already been transferred.
The limitations of the platform were fully transparent to the company’s leadership, according to the former employee. An outside consultant’s recent compliance analysis of Block was included in the documentation provided by the whistleblower. The survey identified over 50 deficiencies.
A Need for Regulation
The U.S. sanctions exist because of the prevalence of bad actors, including terrorist groups, in the identified countries. The allegations emerge at a time when regulatory agencies are already scrutinizing the operations of payment platforms
Block, launched by Twitter co-founder Jack Dorsey, has become a popular payments option. More than 75% of Americans reportedly have used peer-to-peer payments platforms PayPal, Venmo, and Cash App. After news of the federal investigation, Block shares dropped by over 9%.
