Cash App Penalties Total $40 Million in a New York Settlement

Block Inc. has been ordered to pay a $40-million fine to the state of New York for what the state’s regulator on Thursday called “significant failures in its Bank Secrecy Act/Anti-Money Laundering compliance program, which violated the [New York Department of Financial Services’ money transmitter and virtual currency regulations.”  The alleged violations occurred in connection with Block’s popular Cash App product.

The New York case represents the latest such agreement with state regulators, according to a Block spokesperson, who did not specify the states or the total amount of the fines. “We have now reached an agreement with the final remaining state money-transmission regulator,” the spokesperson says by email. She says the alleged violations in these cases concerned a prior compliance program followed by Cash App, without laying out details. The state said an “independent monitor” will oversee Block’s compliance going forward. “We are pleased to put this matter behind us,” she adds.

In the New York case, Block did not “admit to any of the department’s findings,” the spokesperson says, adding Cash App “has devoted significant financial and other resources to compliance remediation and enhancements.”  The state alleged Block had failed to exercise customer due diligence and to enable “sufficient risk-based controls” aimed at stopping money laundering and other illegal activity. San Francisco-based Block had also failed to “effectively and timely monitor transactions,” the state charged.

With respect to Bitcoin, Block was guilty of “lax treatment” of these “high-risk transactions,” the state charged, which allowed “largely anonymous transactions to proceed without proper scrutiny.”

Cash App last year delivered $5.24 billion in gross profit for Block, representing by far its most profitable product. By the fourth quarter last year, the app had attracted 57 million active users, according to a company presentation, with 25 million using the product’s related Cash App card.

The app, which enables users to perform multiple functions including sending and receiving money and buying stocks and Bitcoin, was launched in 2013.