Block Inc. to Pay $40 Million Fine for AML Compliance Failure
Block Inc. will pay a fine of $40 million as penalty for failure to comply with the Anti-Money Laundering program and virtual currency regulations.
The New York Department of Financial Services (NYDFS) has fined Block Inc., a payment platform led by Jack Dorsey, $40 million for “significant failures” in its anti-money laundering compliance program.
Since 2018, Block has held a New York BitLicense to conduct digital assets operations in the state. New York’s superintendent of financial services, Adrienne Harris, said Block had “significant failures in its compliance program”.
“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.
Block Inc. to Pay Anti-Money Laundering Fines
A report from the regulators’ investigation revealed critical gaps in Block’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program, including inadequate customer due diligence, failure to implement sufficient risk-based controls designed to prevent money laundering and illicit activity, and failure to effectively and timely monitor transactions.
“Compliance functions must keep pace with company growth or expansion. 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.”
Block’s rapid growth, coupled with inadequate BSA/AML controls, created an environment vulnerable to criminal exploitation. According to a report from NYDFS, in 2023, Block had revenue of $21.91 billion. The Company’s total assets more than doubled from 2021 to 2023, growing from $15.02 billion to $34.06 billion.
In a statement, a representative from Block noted that the concerns were mainly tied to Cash App’s former compliance structure, and the firm has notably ramped up its investment in compliance and risk management.
Previous Settlements and Efforts to Enhance Compliance
This penalty is Block’s second recent reprimand for purported AML deficiencies. Earlier this year, the company resolved a similar issue by disbursing $80 million to 48 state regulators in January. In a similar issue, another entity, OKX, encountered a $1.2 million penalty in Malta due to claims violating AML regulations.
As part of the settlement terms and conditions, Block Inc. will not only pay the monetary penalty but also appoint an independent monitor to assess the company’s compliance program progress.
