Block Fined $40M for AML Failures, Ordered to Overhaul Systems
Block Inc., formerly Square, has been fined $40 million by the New York Department of Financial Services (NYDFS) for Anti-Money Laundering (AML) and compliance failures related to its virtual currency operations. The company, led by Jack Dorsey, has also been ordered to improve its systems and be supervised for a year.
Block's compliance system was found to be inadequate, failing to flag Bitcoin transactions linked to illicit or sanctioned activity unless specific thresholds were exceeded. This oversight allowed for potential financial crimes to go undetected. Furthermore, the company continued to label crypto mixer transactions as only 'medium' risk, disregarding repeated regulatory guidance.
The NYDFS also discovered that Block's backlog of unresolved transaction alerts skyrocketed from 18,000 in 2018 to over 169,000 in 2020, significantly delaying investigations into potential financial crimes. Block will now pay the $40 million fine and be supervised by an independent monitor to overhaul its AML protocols, sanctions screening, and transaction monitoring systems.
Block Inc. has been active in Africa, partnering or investing in various companies, including Yellow Card, Gridless Compute, and Chipper Cash. Despite these investments, the company's systems failed to meet state AML standards, exposing vulnerabilities in its oversight of BTC transactions. Block must now address these deficiencies to ensure it complies with regulatory requirements and maintains the trust of its users and partners.
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