Block Fined $40 Million By New York Regulator Over Cash App Compliance Failures

by Murtuza J Merchant Benzinga Staff Writer

Zinger Key Points

Cash App’s compliance deficiencies violated New York’s money transmitter and virtual currency regulatory requirements.
DFS will require Block to bring in an independent monitor to oversee and verify its remediation efforts.
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The New York State Department of Financial Services (DFS) has fined Block, Inc. XYZ $40 million for violations tied to its anti-money laundering and virtual currency compliance protocols on the Cash App platform.

The enforcement action follows a state-led investigation revealing significant regulatory gaps in customer identification and transaction monitoring, increasing the risk of illicit financial activity.

According to DFS Superintendent Adrienne A. Harris, the fine addresses years of insufficient oversight at Cash App, particularly in handling high-risk Bitcoin BTC/USD transactions and managing transaction alerts during the app's rapid expansion between 2019 and 2020.

"Compliance functions must keep pace with company growth or expansion," said Harris. "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."

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The state's probe found that Block failed to perform adequate customer due diligence and lacked effective systems to identify and prevent money laundering.

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One critical concern was the processing of anonymous, high-risk Bitcoin transactions without sufficient scrutiny, along with a significant backlog of unreviewed alerts that went unaddressed for a prolonged period.

Under the settlement, Block must appoint an independent monitor to oversee the development of an improved compliance program.

DFS said the company has cooperated throughout the investigation and is already investing in corrective measures.

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