US federal prosecutors are investigating the financial
transactions of Block, the firm co-founded by Jack Dorsey, according to NBC News. Findings from internal documents reportedly indicate compliance
issues at Square and Cash App. The documents provided by a former employee reportedly highlighted inadequate collection of customer information and processing of
transactions involving sanctioned countries.
Alleged Compliance Failures
The employee alleged that despite being alerted
to compliance breaches, Block did not rectify its processes. Thousands of
transactions, including credit card transactions, dollar transfers, and Bitcoin
transactions, went unreported to the government. The documents point to
transactions with countries like Cuba, Iran, Russia, and Venezuela, raising
concerns about regulatory compliance.
According to the sources cited by NBC News, Block‘s compliance
section faced significant flaws, such as a lack of leadership capable of overseeing a
regulated compliance program. An external consultant identified nearly 50
deficiencies in the systems for monitoring suspicious activities and screening
for sanctions violations.
The Block’s board and senior management were
reportedly aware of the compliance lapses. The recent departures of directors
Lawrence Summers and Sharon Rothstein raised questions about governance 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 Scrutiny
In 2021, its European version of Cash App was fined for violating money laundering and terrorism financing regulations. Regulators were 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 deficiencies identified by the former employee
but disputed their interpretation, emphasizing its commitment to compliance and
ongoing efforts to improve its systems.
This development followed the sentencing of Binance’s former CEO, Changpeng Zhao, to a four-month prison sentence over similar
concerns. Zhao pleaded guilty to charges of failing to implement anti-money
laundering programs and allowing unlawful transactions on Binance.
This sentencing followed a long-standing legal
investigation into Binance’s operations. In November, Zhao struck a deal with
U.S. authorities to settle the investigation, agreeing to step
down as CEO. Additionally, Binance is facing 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.
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