Block Fined $40 Million by NYS Over Cash App

<p>The NY State Dept&period; of Financial Services announced that Block&comma; Inc&period; &&num;8212&semi; owner of Cash App &&num;8212&semi; will pay a &dollar;40 million penalty for significant failures in its Bank Secrecy Act&sol;Anti-Money Laundering compliance program&comma; which violated the Department’s money transmitter and virtual currency regulations&period; In addition to the monetary penalty&comma; Block is required to retain an independent monitor to perform a comprehensive evaluation of its compliance with the Department’s regulations and its remediation efforts&period;<&sol;p>&NewLine;<p>&OpenCurlyDoubleQuote;All financial institutions&comma; whether traditional financial services companies or emerging cryptocurrency platforms&comma; must adhere to rigorous standards that protect consumers and the integrity of the financial system&comma;” <strong>said Department of Financial Services Superintendent Adrienne Harris<&sol;strong>&period; &OpenCurlyDoubleQuote;Compliance functions must keep pace with company growth or expansion&period; 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&period; The Department is taking decisive steps to ensure accountability&comma; including the appointment of an independent monitor to oversee corrective measures&period;”<&sol;p>&NewLine;<p>Block owns and operates Cash App&comma; a peer-to-peer money transmission service that allows users to send and receive fiat currency&period; The company has been licensed by the Department to conduct money transmission business in the State of New York since 2013&comma; and virtual currency business through Cash App since 2018&period;<&sol;p>&NewLine;<p>The Department’s investigation revealed critical gaps in Block’s Bank Secrecy Act&sol;Anti-Money Laundering &lpar;BSA&sol;AML&rpar; program&comma; including inadequate customer due diligence&comma; failure to implement sufficient risk-based controls designed to prevent money laundering and illicit activity&comma; and failure to effectively and timely monitor transactions&period; Notably&comma; Block’s lax treatment of high-risk Bitcoin transactions allowed largely anonymous transactions to proceed without proper scrutiny&period; Additionally&comma; Block’s rapid growth between 2019 and 2020 contributed to a severe transaction alert backlog&comma; which Block left unaddressed for a significant period of time&period;<&sol;p>&NewLine;<p>Block’s rapid growth&comma; coupled with inadequate BSA&sol;AML controls&comma; created an environment vulnerable to criminal exploitation&period; Under the terms of the consent order&comma; an Independent Monitor will be installed to ensure Block builds a successful and effective compliance program capable of identifying and preventing illicit activity&comma; protecting the integrity of New York’s financial system&period;<&sol;p>&NewLine;<p>The Department acknowledges Block’s cooperation throughout the investigation&period; The company has already committed significant financial and other resources to remediate the shortcomings identified in the Consent Order&period;<&sol;p>&NewLine;