Jack Dorsey's Block, Inc. settles for $40 million with NY regulator over AML failures

Jack Dorsey's Block, Inc. reached a $40 million settlement with New York's top financial regulator after an investigation found that the company had "critical gaps" in anti-money laundering requirements.

Block, Inc., a financial services and technology company previously called Square Inc., offered bitcoin through its Cash App, which allows users to send and receive fiat currency. However, the AML program run by the firm "failed to adequately consider the substantial risks posed to an entity of its new size and complexity," the New York Department of Financial Services said on Thursday in a consent order. 

"Compliance functions must keep pace with company growth or expansion," said NYDFS Superintendent Adrienne Harris in a statement. "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."

NYDFS said Block, Inc. had AML gaps, including failing to have risk-based controls to prevent money laundering and illicit activity, and had done insufficient customer due diligence. 

"Notably, Block’s lax treatment of high-risk Bitcoin transactions allowed largely anonymous transactions to proceed without proper scrutiny," the regulator said.

NYDFS said Block, Inc. cooperated throughout the investigation and has worked on remedies. The settlement requires Block to hire an independent monitor, the regulator said in the statement. NYDFS has been active in crypto regulation and enforcement in the state for years, launching its BitLicense regime in 2015.

State level

Block, Inc. previously paid $80 million to 48 state financial regulators in January over violations of AML laws. 

A Block, Inc. spokesperson said Thursday's action marks the last agreement with state regulators.

"Following our recent settlement with our other state money transmission regulators, we have now reached an agreement with the final remaining state money transmission regulator, New York Department of Financial Services, to resolve a matter principally related to Cash App’s past compliance program," the spokesperson said in an email. "This marks the resolution of all previously pending state money transmission license matters."

The spokesperson also noted that Block, Inc. did not admit to findings and said Cash App has  "devoted significant financial and other resources to compliance remediation and enhancements."