Block, the fintech conglomerate founded by Jack Dorsey and parent company of CashApp and Square, is currently under investigation by federal authorities for alleged violations of U.S. sanctions and other regulatory non-compliance issues within its Square and Cash App units, according to an NBC News investigation. This scrutiny comes amid concerns of “widespread” compliance failures across the company’s major divisions. The allegations are similar to the Binance case.
Quick Take
- Investigation Trigger: An NBC News investigation reveals that Block, including its Square and Cash App units, is under federal examination for possible violations of U.S. sanctions and other regulatory compliance issues.
- Whistleblower Involvement: Former employees are cooperating with federal prosecutors, providing insights and documents that suggest widespread compliance failures at Block.
- Specific Allegations: Block is accused of processing crypto transactions linked to sanctioned countries and potentially terrorist-affiliated organizations due to inadequate monitoring systems.
- Extent of Compliance Issues: Alleged long-standing and extensive lapses in compliance across major divisions of the company, with thousands of questionable transactions reportedly unreported to the Office of Foreign Assets Control (OFAC).
- Internal Documents Revealed: Ex-employees have supplied over 100 pages of internal documents indicating ongoing transactions with entities in sanctioned countries such as Russia and Iran.
- Company’s Response: Block denies knowingly violating international sanctions and states that its legal team and consultants are working on appropriate remediation strategies. The company asserts it conducts regular sanctions screenings for all its merchants.
The Case Explained
Federal prosecutors, along with the assistance of former employees now acting as whistleblowers, are examining Block‘s crypto operations and probing into the company’s compliance practices. Reports suggest that Block, also co-founded by Twitter creator Jack Dorsey, may have inadequately monitored crypto transactions that were linked to sanctioned nations and possibly connected to terrorist organizations.
Read our reports on Jack Dorsey here.
The investigative report highlights that these compliance issues are not isolated incidents but part of broader, long-standing lapses within the company. A former employee of Block described the compliance infrastructure as fundamentally flawed, alleging that thousands of dubious transactions potentially violating U.S. sanctions went unreported to the Office of Foreign Assets Control (OFAC), which is responsible for enforcing economic and trade sanctions.
Moreover, the investigation unveiled internal documents provided by ex-employees detailing exchanges between Block and entities in sanctioned countries like Russia and Iran, continuing well into the previous year. This correspondence allegedly demonstrates that Block continued to facilitate these transactions even after becoming aware of sanctioned entities misusing its services.
In response to these allegations, Block has stated that it did not knowingly engage in transactions that violate international sanctions. While the company declined to address specific queries regarding the reported compliance lapses directly, it emphasized that its legal team, alongside external counsel and consultants, is actively advising on addressing and rectifying these issues. Block also assured that it would conduct regular sanctions screenings for all its merchants.
This investigation into Block‘s compliance practices poses significant reputational and operational risks for the company, highlighting the challenges fintech firms face in maintaining robust regulatory compliance amid rapidly evolving global financial landscapes.
