New York financial regulators have hit Block (formerly Square) with a $40 million penalty for serious deficiencies in its anti-money laundering (AML) and cryptocurrency compliance programs. The settlement with the New York Department of Financial Services (NYDFS) comes after an investigation revealed systemic weaknesses in Block’s oversight of its Cash App platform.
While Block has legally operated its money transmission business in New York since 2013 and its cryptocurrency services since 2018, regulators found alarming gaps in compliance practices. The probe identified inadequate customer verification procedures, insufficient risk monitoring systems, and failure to properly track suspicious transactions – particularly for high-risk Bitcoin transfers that often proceeded without proper scrutiny.
The investigation determined that Block’s explosive growth between 2019-2020 overwhelmed its compliance operations, creating a dangerous backlog of unaddressed transaction alerts. Regulators criticized the company’s “lax treatment” of cryptocurrency transactions, which allowed potentially suspicious activity to go unchecked for extended periods.
As part of the settlement, Block must appoint an independent monitor for at least one year to evaluate and overhaul its compliance systems. NYDFS Superintendent Adrienne Harris emphasized that “compliance functions must keep pace with company growth,” noting that Block prioritized expansion over establishing proper safeguards required for financial services providers.
This penalty marks the latest regulatory action against cryptocurrency platforms as authorities intensify scrutiny of AML controls in digital asset markets. For Block, the fine represents a significant reputational challenge for its Cash App platform, which has become increasingly important to the company’s financial services strategy. The company now faces pressure to demonstrate it can scale its operations while meeting stringent compliance requirements in New York and other regulated markets.