Federal prosecutors for the Southern District of New York are investigating Block, Inc. fintech company founded by Jack Dorsey, co-founder of Twitter. The investigation focuses on allegations of compliance violations stretching back years at Block's two main businesses, Square and Cash App.
NBC News reported on May 1 that a former Block employee provided prosecutors with documents showing that the company did not collect enough customer information to assess risk and process thousands of transactions. The epidemic involves countries under economic sanctions, and even conducting cryptocurrency transactions for terrorist groups.
The document, about 100 pages long, identifies transactions, often of small value, involving entities in countries sanctioned by the US such as Cuba, Iran, Russia and Venezuela. These transactions are believed to have taken place until last year.
According to this former employee, the majority of transactions, including credit card transactions, USD and Bitcoin transfers, were not reported to the government as required. The person also said Block failed to fix its processes despite being warned about the violations.
Edward Siedle, a former SEC attorney representing the whistleblower, asserted that according to what he knew from the documents, Block's management and board of directors knew about the compliance failures for many years. .
Responding to the allegations, a Block spokesperson stated that they have a comprehensive compliance program and regularly adjust operations to meet emerging threats and the regulatory environment. The company is also committed to continuing to invest in its compliance program.
The investigation comes after NBC News reported in February that two other whistleblowers reported compliance lapses at Cash App, Block's popular mobile payments app. Cash App allows users to send and receive money, buy stocks and Bitcoin, and currently has 56 million active trading accounts.
The investigation not only raises questions about the effectiveness of internal controls but also threatens Block's future with the risk of facing financial and legal penalties. The case also raises doubts about Block's ability to prevent illegal financial activities, especially in the context of the company's push to develop cryptocurrency.
