Block Inc. hit with $40 million penalty over lapses in anti-money laundering systems
Pranjal Chandra | Apr 12, 2025, 17:08 IST
Block Inc., parent of Cash App and Square, faces a $40 million settlement with NYDFS due to AML compliance failures. Regulators found deficiencies in detecting illicit transactions, including those linked to terrorism and sanctioned nations. This action signals stricter fintech oversight, requiring Block to enhance compliance and undergo monitoring, highlighting the need for robust controls amid rapid growth.
In a major move signaling tougher oversight of fast-growing financial technology platforms, Block Inc. — the parent company of Cash App and Square — has agreed to a $40 million settlement with the New York State Department of Financial Services (NYDFS) over what regulators described as “serious compliance deficiencies” in the company’s anti-money laundering (AML) and transaction monitoring systems.
The enforcement action, announced Thursday, shines a harsh light on the regulatory vulnerabilities of popular digital payment platforms, especially as their use expands into cryptocurrencies. The NYDFS’s findings suggest that Cash App’s systems left the door wide open to criminal misuse, including transactions linked to terrorist financing and sanctioned countries.
The consent order issued by NYDFS reveals a troubling picture. Block’s AML program failed to detect and prevent illicit transactions — particularly those involving bitcoin wallets connected to terrorism. In one key example, regulators found that Cash App did not flag or block transactions with terrorism-linked wallets until their exposure exceeded 10%, an unacceptable threshold for any financial institution, let alone a consumer-facing app with millions of users.
"Any exposure to terrorism-connected wallets is illegal," NYDFS stated firmly in the order.
These issues, regulators said, stemmed from Block’s inability to scale its compliance infrastructure to match its rapid growth between 2021 and 2022, a period during which Cash App’s user base and crypto offerings grew substantially.
This case marks a critical moment in the evolution of fintech oversight. As companies like Block — co-founded by Twitter’s Jack Dorsey, who now serves as its “Block Head and chairman” — expand beyond traditional banking boundaries, regulators are insisting on stricter controls and accountability.
The $40 million penalty is just part of the consequences. Block must now bring in an independent monitor for at least a year to evaluate and report on the company's anti-money laundering and sanctions compliance programs. This monitor, selected by the NYDFS, will assess the effectiveness of existing controls and oversee implementation of corrective measures.
Notably, the consent order clarifies that the agreement does not prevent federal or other state agencies from taking action. That leaves open the possibility of further investigations or penalties, particularly at the federal level.
The settlement corroborates a 2024 NBC News investigation based on allegations from former Block employees, one of whom was interviewed by federal prosecutors. According to these insiders, Cash App processed cryptocurrency payments for terrorist groups and failed to take corrective steps even after being alerted to compliance breaches.
The concerns weren’t limited to Cash App. Square, another business unit under Block, allegedly facilitated thousands of transactions involving entities in countries under U.S. sanctions — including Iran, Cuba, Russia, and Venezuela — as recently as 2023.
Supporting documents provided to NBC News revealed that many of these transactions involved small-dollar amounts — a strategy commonly used to evade detection by automated compliance systems.
While Block did not admit wrongdoing, it issued a statement saying it was “pleased to put the matter behind it,” and highlighted that it had “devoted significant financial and other resources to compliance remediation and enhancements.”
“We share the department’s dedication to addressing industry challenges and remain committed to investing across our operations to help promote a safe and healthy financial system,” the company said.
Block’s settlement signals a broader reckoning for fintechs that have long operated in a gray zone of financial regulation, especially those involved in cryptocurrency. As regulators push for “radical transparency,” fintech giants are being reminded that growth without guardrails can quickly turn into a liability — not only for companies, but for national and global security.
The case also raises important questions about the future of decentralized finance and the balance between innovation and regulation — a tension that’s only growing as traditional watchdogs tighten their grip on digital transactions.
The enforcement action, announced Thursday, shines a harsh light on the regulatory vulnerabilities of popular digital payment platforms, especially as their use expands into cryptocurrencies. The NYDFS’s findings suggest that Cash App’s systems left the door wide open to criminal misuse, including transactions linked to terrorist financing and sanctioned countries.
High risk and low controls
"Any exposure to terrorism-connected wallets is illegal," NYDFS stated firmly in the order.
These issues, regulators said, stemmed from Block’s inability to scale its compliance infrastructure to match its rapid growth between 2021 and 2022, a period during which Cash App’s user base and crypto offerings grew substantially.
Regulatory wake-up Call for fintech
The $40 million penalty is just part of the consequences. Block must now bring in an independent monitor for at least a year to evaluate and report on the company's anti-money laundering and sanctions compliance programs. This monitor, selected by the NYDFS, will assess the effectiveness of existing controls and oversee implementation of corrective measures.
Notably, the consent order clarifies that the agreement does not prevent federal or other state agencies from taking action. That leaves open the possibility of further investigations or penalties, particularly at the federal level.
Internal whistleblowers confirmed systemic failures
The concerns weren’t limited to Cash App. Square, another business unit under Block, allegedly facilitated thousands of transactions involving entities in countries under U.S. sanctions — including Iran, Cuba, Russia, and Venezuela — as recently as 2023.
Supporting documents provided to NBC News revealed that many of these transactions involved small-dollar amounts — a strategy commonly used to evade detection by automated compliance systems.
Block’s response: reform underway
“We share the department’s dedication to addressing industry challenges and remain committed to investing across our operations to help promote a safe and healthy financial system,” the company said.
A cautionary tale for the fintech boom
The case also raises important questions about the future of decentralized finance and the balance between innovation and regulation — a tension that’s only growing as traditional watchdogs tighten their grip on digital transactions.