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Apart from failing to report transactions to the appropriate authorities, revelations from the whistleblowers pointed towards deliberate concealment of transactional data within Cash App.
In the United States, federal prosecutors are currently investigating Block, an online payment and financial services company founded by former Twitter CEO Jack Dorsey. The focus of the probe revolves around the company’s failure to adhere to proper compliance practices.
According to a recent report from NBC News citing two people familiar with the matter, authorities are investigating internal business operations of the company as well as its crypto unit over allegations of processing transactions linked to sanctioned countries and even terrorists. These countries includes Russia, Iran, Cuba, and Venezuela.
Former Block’s Employees Turn Whistleblowers
The accusations against Dorsey’s Block gained momentum following disclosures by former employees turned whistleblowers. These insiders, as reported by NBC, provided authorities from the Southern District of New York with evidence suggesting Block’s payment unit Square and Cash App knowingly violated federal regulations.
The 100-paged document revealed that the company processed “thousands” of transactions to sanctioned countries and terrorists despite being aware of regulatory violations.
Furthermore, the former employees alleged that Block failed to report “thousands” of transactions involving sanctioned entities to the government as demanded by law, raising concerns about potential violations of international trade rules. The transactions were conducted using credit cards, fiat currencies and even cryptocurrencies such as Bitcoin (BTC).
Everything Is Flawed
Apart from failing to report transactions to the appropriate authorities, revelations from the whistleblowers pointed towards deliberate concealment of transactional data within Cash App. As per the NBC report, these compliance failures are just one aspect of the larger “extensive and longstanding compliance failures” identified within Block’s Square and Cash App units. The whistleblowers alleged that the entire compliance framework of the company is flawed.
“From the ground up, everything in the compliance section was flawed. It is led by people who should not be in charge of a regulated compliance program,” said the whistleblowers.
Edward Siedle, a former Securities and Exchange Commission (SEC) attorney who is representing the whistleblowers, told NBC that based on the documents provided, there is evidence to suggest that the compliance breaches were well-known to both Block’s leadership and its board over the past few years.
Block Responds to Allegations of Compliance Fraud
In response to the compliance issues, a spokesperson for Block conveyed to NBC that the company maintains a robust and diligent compliance program. According to him, the program is consistently updated to address emerging threats and keep pace with the evolving regulatory landscape surrounding sanctions.
Addressing the specific allegations concerning the non-reporting of “thousands” of transactions to the Office of Foreign Assets Control (OFAC), the spokesperson clarified that these transactions were indeed voluntarily reported to the regulator.
Furthermore, the spokesperson said that Block’s compliance program incorporates sophisticated systems, tools, and processes for screening against sanctions. It also includes mechanisms for investigating and reporting on sanctions-related matters, all in accordance with the company’s regulatory obligations.
Not the First
Meanwhile, Block has faced federal scrutiny before. In February this year, US prosecutors opened an investigation into the firm to assess whether Block’s mobile payment platform, Cash App, might have facilitated money laundering, terrorism financing, and related illicit activities.
Additionally, in 2021, Block’s European iteration of Cash App was fined for breaching regulations related to money laundering and terrorism financing.
