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New York’s Department for Financial Services has fined US payments firm Block $40m (£30.6m) for "significant" failures in its Bank Secrecy Act /anti-money laundering compliance programme.
The department said the firm breached its money transmitter and virtual currency regulations.
Block, which owns and operates Cash App, a peer-to-peer money transmission service that allows users to send and receive fiat currency, must now also retain an independent monitor to perform a comprehensive evaluation of its compliance with the department’s regulations.
Adrienne A Harris, superintendent of financial services, said all financial institutions had to adhere to rigorous standards to protect consumers and the integrity of the financial system.
“Compliance functions must keep pace with company growth or expansion,” she said. “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.”
The department found inadequate customer due diligence at Block, as well as failures to implement sufficient risk-based controls designed to prevent money laundering and illicit activity, and failures to effectively and timely monitor transactions.
It said Block’s lax treatment of high-risk Bitcoin transactions allowed largely anonymous transactions to proceed without proper scrutiny.
According to the department, Block’s rapid growth between 2019 and 2020 contributed to a severe transaction alert backlog, which the company left unaddressed for a significant period of time.
In a statement, the company told Vixio that it “did not admit to any of the department’s findings”.
“We are pleased to put this matter behind us. As the Department has acknowledged, Cash App has devoted significant financial and other resources to compliance remediation and enhancements,” a spokesperson said. “This has been done while serving millions of customers with critical, affordable financial services.”
