Block Negotiates NYDFS Settlement Over AML, Bitcoin Programs

Block Inc., the payments company led by former Twitter CEO Jack Dorsey, is currently engaged in negotiations with the New York State Department of Financial Services (NYDFS) to resolve allegations related to its Anti-Money Laundering (AML) and Bitcoin programs. According to a recent regulatory filing, the company is in "continuing negotiations" with NYDFS to determine whether the matter can be settled on acceptable terms.

The company has set aside funds for a potential settlement but considers the amount "not material" to its financial outlook for 2024, suggesting that the settlement is not expected to have a major impact on its finances this year. These negotiations are part of a broader pattern of regulatory challenges that Block has faced in recent years, with multiple U.S. state money transmission regulators investigating the company's operations between January 2021 and March 2023.

These investigations uncovered deficiencies in Block's AML Program, particularly regarding compliance with the Bank Secrecy Act. In January, Block reached a settlement agreement with multiple state money transmission regulators over these compliance issues, agreeing to pay $80 million in penalties. However, New York was not among the states included in this settlement, which explains the ongoing separate negotiations with NYDFS.

The multi-state settlement also requires Block to take several steps to improve its compliance programs. The company must appoint an independent consultant to review and enhance its AML Program and establish a Compliance Management Committee to oversee the implementation of corrective measures. Block expects to complete these payments by February 2025 and has neither admitted nor denied any wrongdoing in agreeing to this settlement.

Block's regulatory challenges extend beyond the AML issues. In January, the Consumer Financial Protection Bureau (CFPB) investigated Cash App, Block's popular mobile payment service, over its handling of customer complaints and disputes. This investigation resulted in Block agreeing to pay a $55 million civil penalty and between $75 million and $120 million in restitution to affected Cash App customers.

Block is also dealing with tax-related issues. The company is currently in a dispute with the San Francisco Treasurer and Tax Collector's office, which audited Block's tax receipts from 2020 to 2022. The local tax authority claims that additional taxes are owed on Bitcoin-related revenue generated by the company during this period.

The outcome of Block's negotiations with New York