Quick take:
- Block has agreed to pay a penalty of $40 million for inadequate compliance.
- The company is also required to undergo a comprehensive performance evaluation of its compliance with the department’s regulations and remediation efforts conducted by an independent monitor.
- The department said its investigations reportedly revealed that Block failed to conduct adequate customer due diligence and implement sufficient risk-based controls against money laundering.
Jack Dorsy’s fintech company, Block, has agreed to a settlement of $40 million with the New York Department of Financial Services (NYDFS) for having inadequate anti-money laundering controls.
According to the press release on Thursday, Block failed in its Bank Secrecy Act/Anti-Money Laundering compliance program, which violated the Department’s money transmitter and virtual currency regulations.
In addition to the penalty, the fintech, renowned for the Cash App, will also be required to undergo a comprehensive performance evaluation of its compliance with the department’s regulations and remediation efforts conducted by an independent monitor.
The department said its investigations reportedly revealed that Block failed to conduct adequate customer due diligence and implement sufficient risk-based controls against money laundering.
Commenting on the press release, Superintendent Adrienne A. Harris said: “All financial institutions, whether traditional financial services companies or emerging cryptocurrency platforms, must adhere to rigorous standards that protect consumers and the integrity of the financial system.”
According to Harris, Black’s compliance functions did not match up to Cash App’s rapid growth, which created risk and vulnerabilities that violated the rules financial services companies operating in New York are required to adhere to. “Compliance functions must keep pace with company growth or expansion,” Harris said.
According to the press release, some of the critical gaps identified in Block’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program include inadequate customer due diligence, failure to implement sufficient risk-based controls designed to prevent money laundering and illicit activity, and failure to effectively and timely monitor transactions.
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