Block Fined $40M for AML Failures on Cash App

Block Inc., the financial services company led by Jack Dorsey, has been fined $40 million by the New York Department of Financial Services (NYDFS) for significant failures in its anti-money laundering (AML) compliance program. The settlement follows an investigation that revealed critical deficiencies in customer due diligence, risk-based controls, and transaction monitoring on its Cash App platform. These gaps left the platform vulnerable to criminal exploitation, particularly through largely anonymous Bitcoin transactions that evaded proper scrutiny.

The NYDFS investigation found that Block’s rapid growth had outpaced its compliance functions, creating risks and vulnerabilities that violated the rules financial services companies operating in New York must adhere to. The regulator emphasized that compliance functions must keep pace with company growth to protect the integrity of the financial system. The DFS argued that Block did not have adequate risk assessments regarding the nature of their transactions, allowing gaps for illegal transactions such as terrorism funding. Cash App began offering Bitcoin transactions in 2018 and, according to the DFS, did not create enough oversight to monitor the types of transactions being processed. Cash App has experienced exclusive growth since that time, making it a particularly vulnerable platform for money laundering.

In addition to the fine, Block will be required to retain an independent monitor to oversee improvements to its compliance systems and ensure alignment with state regulatory standards. The company has been licensed to conduct money transmission in New York since 2013 and has held a virtual currency license under the state’s BitLicense regime since 2018. The DFS reported that between 2018 and 2021, Cash App had accumulated many backlogs. In 2020, the number of logs grew to over 169,000. Response times were especially dismal, with some alerts taking over a year for Cash App to respond. DFS also had an issue with Block’s annotation of transactions. Block would label transactions associated with mixers as medium risk. Meanwhile, the DFS believes those transactions should be labelled as high risk.

The enforcement action comes just months after Block paid $80 million to multiple state financial regulators over separate AML violations. The latest probe revealed a backlog of unresolved transaction alerts between 2019 and 2020, which increased the risk of illicit financial activity on the platform. Block cooperated with the NYDFS throughout the investigation and has already begun investing in compliance remediation. Block has been ordered to seek outside help to monitor its transactions on Cash App and improve its service. The DFS concludes that Block had loose transaction standards and that, as a result, anonymous transactions were being processed regularly.

“This marks the resolution of all previously pending state money transmission license matters. The department has acknowledged that Cash App has devoted significant financial and other resources to compliance remediation and enhancements. We share the department’s dedication to addressing industry challenges and remain committed to investing across our operations to help promote a safe and healthy financial system,” said Block spokeswoman. Adrienne Harris, DFS superintendent, announced the $40 million fine against Block for its anti-money laundering procedures and virtual currency compliance deficiencies. The fines relate to the Cash App platform, owned by Block. Harris points out that the company failed to monitor transactions adequately and had no procedure to identify customers properly. As part of the settlement with Block, the company must hire an external monitor to help it overcome these issues. There has also grown a large backlog of issues due to the company’s rapid growth. Block has responded to the charges and states that they disagree with the verdict but are committed to improving their service.