Block, founded by Jack Dorsey, has agreed to pay a $40 million fine under a settlement with New York’s financial regulator. The decision arises due to insufficient oversight and compliance issues regarding Bitcoin transactions conducted via its Cash App service.
Weak Oversight in Bitcoin Transactions
Investigations indicated that Bitcoin transactions offered by Cash App since 2018 had not undergone sufficient risk analysis. The regulator highlighted that high-risk and anonymous Bitcoin transactions occurred without the required scrutiny.
Insufficient Risk Analysis and Assessment
Reports showed that significant backlogs in system alerts concerning customer transactions emerged during the rapid growth phases of 2019 and 2020, many of which went unassessed. This points to the company's struggle with necessary internal controls.
Independent Auditor Appointment and Compliance Process Initiation
As part of the signed agreement, Block will appoint an independent auditor to ensure future compliance. This auditor will regularly monitor obligations under the Bank Secrecy Act and anti-money laundering regulations. Adrienne A. Harris, head of the New York Department of Financial Services, emphasized the need for companies to strengthen their compliance systems in tandem with their growth.
Block's experience underscores the serious consequences that can arise from lax financial compliance practices among rapidly growing technology firms.
