The Digital Payments Company, co-founded by Jack Dorsey, has settled with New York State financial regulator amid suspicions of compliance issues with the Bank’s Secret Law/Money Laundering (BSA/AML) program.
In a statement, the New York Financial Services Agency (NYDFS) said the block was expired in the way it operates Cash App, the company’s peer-to-peer money transmission service, which began offering Bitcoin (BTC) transactions in 2018.
An investigation conducted by regulators reveals the suspected shortcomings of blocking in customer due diligence practices and the failure to implement controls to prevent money laundering and other illegal activities.
The company is also said to have been unable to quickly address the tough transaction alert backlog, primarily due to rapid growth between 2019 and 2020.
Regulators say Block’s LAX processing of high-risk Bitcoin transactions has allowed anonymous transactions to be pushed without proper scrutiny.
Read the government agency’s consent order,
“The AML programs run by Block, which manages both Fiat and Bitcoin transactions on the Cash App platform, have failed to properly account for the substantial risks posed to new entities of size and complexity.”
The terms of the settlement require that the block pay a $40 million penalty and engage in the services of independent monitors to assess compliance with regulatory and remedial efforts.
Financial Services is supervised by Adrian A. Harris.
“Compliance features must respond to the growth or expansion of the company. The rapid growth of Block’s cash apps has robust compliance features that have created risks and vulnerabilities that have violated the Rules Financial Services company operating in New York.”
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