Block Inc., the company behind Cash App, will pay a
$40 million penalty and bring in an independent monitor after New York’s top
financial regulator found major failures in its anti-money laundering controls.
The settlement concludes the final state-level
probe into the company’s compliance practices and highlights the growing
tension between fast fintech expansion and regulatory oversight.
“All financial institutions, whether traditional
financial services companies or emerging cryptocurrency platforms, must adhere
to rigorous standards that protect consumers and the integrity of the financial
system,” said Superintendent Harris.
Compliance Didn’t Keep Up With Growth
The New York Department of Financial Services (NYDFS)
announced the resolution on Thursday, citing “critical gaps” in Block’s Bank
Secrecy Act and anti-money laundering (AML) programs.
Regulators said Block failed to vet customers properly, monitor transactions, or manage risk, especially regarding Bitcoin activity on the Cash App.
Block, which has held a New York money transmission
license since 2013 and a virtual currency license since 2018, saw its Cash App
user base and transaction volume surge in recent years. In 2024 alone, Cash App
processed $283 billion in inflows and ended the year with 57 million monthly
users.
However, according to the NYDFS, the company’s compliance systems failed to keep pace with that growth. Inadequate customer due
diligence and a lack of risk-based controls created vulnerabilities that
criminals exploited.
Bitcoin Loopholes and Transaction Backlogs
In one instance, Block’s internal review in 2022
revealed over 8,300 accounts linked to a Russian criminal network operating
through Cash App.
“The rapid growth of Block’s Cash App, which was absent a robust compliance function, created risk and vulnerabilities that violated the rules that financial services companies operating in New York must adhere to. The
Department is taking decisive steps to ensure accountability, including the
appointment of an independent monitor to oversee corrective measures.”
The regulator was especially critical of how Block
handled Bitcoin transactions. The company began supporting Bitcoin on Cash App
in 2018, but NYDFS found that transactions were allowed to proceed with minimal
scrutiny, often anonymously, due to weak controls.
Between 2019 and 2020, Block’s compliance operations
became overwhelmed by alert backlogs. Rather than resolving these in a timely
fashion, the company allowed them to linger, further undermining its ability to
detect illicit activity. Under the consent order, Block must now retain an independent monitor to evaluate and oversee the company’s
remedial efforts.
Block Inc., the company behind Cash App, will pay a
$40 million penalty and bring in an independent monitor after New York’s top
financial regulator found major failures in its anti-money laundering controls.
The settlement concludes the final state-level
probe into the company’s compliance practices and highlights the growing
tension between fast fintech expansion and regulatory oversight.
“All financial institutions, whether traditional
financial services companies or emerging cryptocurrency platforms, must adhere
to rigorous standards that protect consumers and the integrity of the financial
system,” said Superintendent Harris.
Compliance Didn’t Keep Up With Growth
The New York Department of Financial Services (NYDFS)
announced the resolution on Thursday, citing “critical gaps” in Block’s Bank
Secrecy Act and anti-money laundering (AML) programs.
Regulators said Block failed to vet customers properly, monitor transactions, or manage risk, especially regarding Bitcoin activity on the Cash App.
Block, which has held a New York money transmission
license since 2013 and a virtual currency license since 2018, saw its Cash App
user base and transaction volume surge in recent years. In 2024 alone, Cash App
processed $283 billion in inflows and ended the year with 57 million monthly
users.
However, according to the NYDFS, the company’s compliance systems failed to keep pace with that growth. Inadequate customer due
diligence and a lack of risk-based controls created vulnerabilities that
criminals exploited.
Bitcoin Loopholes and Transaction Backlogs
In one instance, Block’s internal review in 2022
revealed over 8,300 accounts linked to a Russian criminal network operating
through Cash App.
“The rapid growth of Block’s Cash App, which was absent a robust compliance function, created risk and vulnerabilities that violated the rules that financial services companies operating in New York must adhere to. The
Department is taking decisive steps to ensure accountability, including the
appointment of an independent monitor to oversee corrective measures.”
The regulator was especially critical of how Block
handled Bitcoin transactions. The company began supporting Bitcoin on Cash App
in 2018, but NYDFS found that transactions were allowed to proceed with minimal
scrutiny, often anonymously, due to weak controls.
Between 2019 and 2020, Block’s compliance operations
became overwhelmed by alert backlogs. Rather than resolving these in a timely
fashion, the company allowed them to linger, further undermining its ability to
detect illicit activity. Under the consent order, Block must now retain an independent monitor to evaluate and oversee the company’s
remedial efforts.
This post is originally published on FINANCEMAGNATES.
