US federal prosecutors are investigating the financial dealings of Block, the company co-founded by Jack Dorsey, according to NBC News. Findings from internal documents reportedly point to compliance issues at Square and Cash App. Documents provided by a former employee reportedly highlighted inadequate customer information collection and transaction processing related to sanctioned countries.
Alleged compliance failure
The employee alleged that despite being alerted to compliance violations, Block did not correct its operations. Thousands of transactions, including credit card transactions, dollar transfers, and bitcoin transactions, were not reported to the government. The documents point to transactions with countries such as Cuba, Iran, Russia and Venezuela, raising concerns about regulatory compliance.
According to sources cited by NBC News, Block's compliance department faced significant shortcomings, such as a lack of leadership capable of overseeing a structured compliance program. An external consultant identified nearly 50 flaws in systems for monitoring suspicious activity and examining sanctions violations.
The cluster's board of directors and senior management were reportedly aware of the compliance lapses. The recent departure of directors Lawrence Summers and Sharon Rothstein has raised questions about management and oversight within the company. The Audit Committee, overseen by Lord Paul Deighton, was responsible for reviewing the company's risk assessment and management policies.
Regulatory audit
In 2021, its European version of Cash App was fined for violating money laundering and terrorist financing regulations. Regulators have been concerned about mobile payment platforms like Cash App.
However, Block responded that it has a robust compliance program and regularly updates its practices to meet regulatory requirements. It acknowledged the deficiencies identified by the former employee but disputed their explanation, stressing its commitment to compliance and ongoing efforts to improve its systems.
This development came after the former CEO of Binance, Changpeng Zhao, was sentenced to four months in prison over similar concerns. Zhao pleaded guilty to charges of failing to implement anti-money laundering programs and allowing illegal transactions on the Binance platform.
This ruling came after a long-running legal investigation into Binance's operations. In November, Zhao entered into an agreement with US authorities to settle the investigation and agreed to step down as CEO. Additionally, Binance faces separate charges from the Securities and Exchange Commission and the Commodity Futures Trading Commission.
This article was written by Jared Kirui at www.financemagnates.com.