New York’s top financial regulator attacked a $40 million settlement on Thursday along with Block Inc., the parent of popular money transmission service Cash App.
The New York State Department of Financial Services said in the order of consent that the block’s flaws “created a high-risk environment that is vulnerable to criminal exploitation,” block systems, for example, did not trigger alarms for terrorist and exposed Bitcoin transactions until exposure exceeded 10%.
The department said that exposure to terrorist attack-connected wallets is illegal.
New York regulators have investigated the block practices from early 2021 to September 2022 and concluded that they have not met the significant growth they are experiencing. As a result, the block “inability to fully comply with its obligation to effectively monitor transactions being carried out on the platform due to alleged money laundering and other illegal criminal activities.”
Block, who refused to acknowledge the department’s findings, said he was happy to put the issue behind it.
“As the department has recognized, the Cash app has dedicated its important financial and other resources to rehabilitating and strengthening compliance,” the statement said. “We share our department’s dedication to addressing industry challenges and remain committed to investing in our entire business to help promote a safe and healthy financial system.”
Block was launched by Twitter co-founder Jack Dorsey. Jack Dorsey lists his current title as Blockhead and Chairman.
The parallel exclusive report of the settlement by NBC News last year details the allegations of former block employees that the company’s compliance system is deeply flawed.
A former employee interviewed by federal prosecutors also said they blocked multiple cryptocurrency transactions for the terrorist group and did not correct the company’s processes when warned of violations. Block began offering Bitcoin transactions through the Cash app in 2018.
Another block unit, Square, has processed thousands of transactions, including countries subject to economic sanctions, one former employee told NBC News. Documents provided by previous employees showed transactions that demonstrated many transactions, including entities from organizations in countries subject to US sanctions restrictions (Cuba, Iran, Russia, Venezuela).
Under the terms of the settlement, the Bullock agreed to bring in independent monitors for a year selected by New York regulators and conducted a comprehensive review of the effectiveness of the money laundering and sanctions program. The monitor will oversee corrective actions when necessary and, according to the consent order, report the results to the regulator.
The consent order with the department said it would not “constitute federal or other state agencies or law enforcement agencies.”
