Federal Prosecutors Investigate Compliance Lapses at Block
Block denies the allegations and asserts that it has a robust compliance program in place, including systems for sanctions screening and investigating and reporting on sanctions issues.
Federal prosecutors are investigating Block, the fintech firm founded by Jack Dorsey, over alleged compliance failures at its Square and Cash App units. The investigation focuses on potential violations of sanctions regulations and other regulatory non-compliance issues, according to a news report by NBC News.
The documents suggest that both Square and Cash App, Block's main units, failed to collect adequate information from customers, processed transactions involving sanctioned countries, and facilitated cryptocurrency transactions for terrorist groups. Moreover, many transactions were not reported to the government as required.
Block denies the allegations and asserts that it has a robust compliance program in place, including systems for sanctions screening and investigating and reporting on sanctions issues. However, the former employee disputes this, claiming that thousands of transactions were not reported as Block asserts.
The investigation also highlights deficiencies in Square's practices, including failures to conduct basic customer due diligence on international merchants and improper reimbursement of funds frozen for sanctions violations. Additionally, new customers at Square and Cash App were allowed to conduct transactions before sanctions alerts were resolved.
Block's response to the investigation emphasizes its commitment to compliance and improvement. However, the former employee alleges that compliance lapses were known to Block leadership and the board in recent years.
The investigation comes amid ongoing scrutiny of financial technology companies and their compliance with regulations. Mobile payment apps like Cash App have become increasingly popular but also pose risks to users and the financial system, with law enforcement officials citing instances of criminal misuse.
As the investigation unfolds, Block faces the challenge of addressing compliance deficiencies while maintaining its business relationships and regulatory compliance.
