Block seems to be right in the government’s crosshairs. According to reports, the parent firm of Square and Cash App is under investigation by prosecutors from the Southern District of New York for significant compliance violations. According to NBC News, a former employee of Block has provided federal investigators with papers that illustrate how the business handled unlawful transactions after neglecting to obtain the necessary risk-assessment data from clients.
According to the papers, Block approved many cryptocurrency transactions with recognized terrorist groups. Moreover, it has been alleged that Square handled thousands of transfers involving countries that are subject to economic sanctions. The whistleblower reportedly told NBC News that “everything in the compliance section was flawed, from the ground up.” “Those in charge of a regulated compliance program shouldn’t be there.”
Most transactions allegedly involved credit cards, dollar transfers or Bitcoin and weren’t reported to the government as mandated by law. In addition, Block reportedly refused to “correct company processes” when notified of the breaches.
The investigation follows a separate report from NBC News in February highlighting two different whistleblowers who flagged the same issues at Block. They cited “questionable Cash App transactions with entities under sanction by the Treasury Department’s Office of Foreign Assets Control, operations known to sell personal information and credit card data for illegal purposes, and offshore gambling sites barred to U.S. citizens.”
The practice allegedly spanned multiple years. NBC News says it reviewed around 100 pages of documents from the whistleblower involving people or organizations in countries under US sanctions, including Russia, Iran, Venezuela and Cuba. Some of them were reportedly from as recent as 2023.
The whistleblower claims Block’s management was aware of the alleged offenses. “It’s my understanding from the documents that compliance lapses were known to Block leadership and the board in recent years,” Edward Siedle, a former SEC attorney representing the whistleblower, told NBC News.
The whistleblower says that, besides senior management, Block’s board was told about the compliance issues. Coincidentally or not, several board members made unexpected exits recently, including former US treasury secretary Lawrence Summers, who resigned in February, and Sharon Rothstein, who had been on the board since 2022. Block told NBC News that they were leaving to devote more time to other activities and that their exits weren’t “a result of any disagreements with the company on any matter relating to the company’s operations, policies or practices.”
Federal authorities have taken a greater interest in modern financial platforms in recent years after at least some of them had become something of a Wild West. Of course, FTX’s fraudulent practices and subsequent collapse led to a seismic decline in the cryptocurrency industry. Although it isn’t clear if the feds have gotten involved, Elon Musk’s X (the husk of what was once Dorsey’s Twitter) reportedly violated US sanctions by accepting blue-check subscription payments from terrorist organizations.
