The $40 million fine imposed this week on Block and its subsidiary Cash App is just the latest in a series of hefty penalties the company has faced as it grapples with ongoing compliance concerns.
In the latest imbroglio, New York’s Department of Financial Services said that Block’s customer due diligence and risk-based controls were insufficient, leading to money laundering and terrorism financing. It specifically noted that Block’s bitcoin transactions created “an environment vulnerable to criminal exploitation.” The situation stemmed from Block’s discovery in 2022 that 8,359 Cash App accounts were linked to a Russian criminal network.
Earlier this year, Block agreed to pay an $80 million civil fine to settle similar charges brought by 48 U.S. state financial regulators. The regulators found Block to be out of compliance with certain key requirements, increasing the risk that its services could be misused for money laundering, terrorism financing, or other illegal activities. At the same time, the Consumer Financial Protection Bureau ordered Block to refund up to $120 million to customers and pay a penalty of $55 million to a victims’ relief fund.
Systemic Issues
There have been other issues as well. In 2022, a Cash App employee accessed account data without authorization, followed by another breach the following year. Block later agreed to a $15 million settlement for those incidents.
Speaking to NBC News, an internal whistleblower alleged that Block had a longstanding pattern of over-relying on compliance measures. “From the ground up, everything in the compliance section was flawed,” the former employee said. “It is led by people who should not be in charge of a regulated compliance program.”
Looking for Answers
At one point, Block attributed its issues to the pandemic, stating that Cash App saw unprecedented growth as consumers turned to the platform during a time of crisis, placing pressure on its customer service. The company also claimed that the historical issues outlined in the agreement do not reflect the current Cash App experience.
However, Block appears more committed to addressing its shortcomings. As part of an earlier settlement, the company has agreed to hire an independent consultant to review its anti-money laundering program. Following the review, Block will have 12 months to address any deficiencies identified.
More recently, Block published a white paper detailing how Cash App is fighting back against scams.
It noted: “With each wave of innovation comes a new set of challenges, including the increasing complexity and sophistication of scams. Block takes its responsibilities seriously and is dedicated to maintaining customer trust and safety by proactively addressing emerging risks and threats as the financial ecosystem continues to evolve.”
