Block Inc. Fined $40M for AML Failures, Faces 12-Month Supervision
Block Inc., formerly Square, has been fined $40 million by the New York Department of Financial Services (NYDFS) for failing to meet anti-money laundering (AML) standards in its virtual currency operations. The company will pay the fine within 10 days and undergo 12 months of supervision by an independent monitor to overhaul its AML protocols, sanctions screening, and transaction monitoring systems.
Block's AML failures were significant. Its backlog of unresolved transaction alerts for Bitcoin (btc) skyrocketed from 18,000 to over 169,000 between 2018 and 2020, delaying investigations into potential financial crimes. The company's systems also failed to meet state AML standards, exposing vulnerabilities in its oversight of Bitcoin transactions.
Block labeled crypto mixer transactions as only 'medium' risk, disregarding repeated regulatory guidance. Moreover, the company failed to flag Bitcoin transactions tied to high-risk wallets unless specific thresholds were exceeded, violating state and federal financial crime laws.
Block Inc., led by Jack Dorsey, has expanded its reach globally, including investments in African companies like Yellow Card, Gridless Compute, and Chipper Cash. Despite these international partnerships, the company must now focus on strengthening its AML protocols and ensuring compliance with financial crime laws. The NYDFS fine and subsequent supervision aim to address these critical shortcomings.
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