Block Inc: Cash App $80M BSA/AML Settlement Reached with States

• Block, Inc., parent company of Cash App, reached an $80 million settlement with 48 state financial regulatory agencies, including Vermont DFR.
• The settlement addresses violations of Bank Secrecy Act (BSA) and anti-money laundering (AML) laws, which regulators found created potential for illicit use of Cash App's services.
• Block must pay the penalty, hire an independent consultant to review its BSA/AML program, and correct deficiencies within 12 months after a report is filed.
• State financial regulators, operating under 'Networked Supervision,' are primary supervisors for over 700 money transmitters and 33,000 nonbank financial services companies.
• This multistate enforcement action highlights the critical importance for nonbank financial services providers to maintain robust BSA/AML compliance programs, particularly concerning customer due diligence and high-risk accounts.

This action signals heightened scrutiny from state financial regulators on nonbank financial services for potential money laundering and terrorism financing risks, emphasizing the need for robust internal controls.

Block, Inc., the parent company of the popular mobile payment service Cash App, has agreed to an $80 million settlement following a coordinated enforcement action by the Vermont Department of Financial Regulation (DFR) and 47 other state financial regulatory agencies. The action addresses significant violations of Bank Secrecy Act (BSA) and anti-money laundering (AML) laws, which are designed to protect the financial system from illicit uses.

The settlement, announced by Commissioner Kaj Samsom, requires Block to pay the substantial penalty to the participating state agencies. Additionally, Block must engage an independent consultant to conduct a thorough review of its BSA/AML program, assessing both its comprehensiveness and effectiveness. A report detailing the consultant's findings is due to the states within nine months, after which Block will have a further 12 months to rectify any identified deficiencies.

This multistate financial regulatory action was spearheaded by financial regulators from Arkansas, California, Massachusetts, Florida, Maine, Texas, and Washington State. Block cooperated with the states throughout the settlement process, which involved a broad coalition of state authorities overseeing the financial services sector. Cash App, Block's mobile payment platform, serves over 50 million consumers across the United States, facilitating spending, sending, storing, and investing money.

State regulators determined that Block was not in compliance with specific requirements mandated by BSA/AML regulations. These critical rules obligate financial services firms to implement robust customer due diligence procedures, including verifying customer identities, diligently reporting suspicious activities, and applying appropriate controls for accounts deemed high-risk. The identified BSA/AML compliance failures created a significant potential for Cash App's services to be exploited for illegal activities, such as money laundering, terrorism financing, or other illicit schemes.

The findings highlight a lapse in the company's internal controls designed to prevent financial crime. The independent review mandated by the settlement will scrutinize these areas, ensuring that Block establishes and maintains a program capable of effectively safeguarding its platform against misuse. This Block Inc. enforcement action underscores the heightened scrutiny on nonbank financial services for potential money laundering violations.

This significant multistate enforcement action against Block, Inc. exemplifies the crucial role state financial regulators play in supervising the financial landscape. States serve as the primary licensing and supervisory authorities for money transmitters, overseeing more than 700 such firms nationwide. A substantial 99% of all money transmission activity conducted by these firms operates under the framework of the state-developed Money Transmission Modernization Act (MTMA).

State regulators regularly coordinate their supervision of multistate firms through a system known as "Networked Supervision." This collaborative approach ensures consistency and cooperation across jurisdictions while preserving the individual authority of each state to take direct action when necessary. This framework is vital for protecting consumers and enforcing safety and soundness requirements within the financial industry. Beyond money transmitters, state financial regulators license and supervise over 33,000 nonbank financial services companies, including mortgage companies, money services businesses, consumer finance providers, and debt collectors, all managed through the Nationwide Multistate Licensing System (NMLS).

The $80 million BSA/AML settlement against Block Inc.'s Cash App sends a clear signal to the broader fintech industry regarding the imperative of stringent regulatory compliance. This action underscores that state financial regulators are actively monitoring nonbank financial services for adherence to anti-money laundering and counter-terrorism financing protocols. Compliance officers at fintechs and money transmitters should review their BSA/AML programs, particularly regarding customer due diligence and high-risk accounts, given this significant multistate enforcement against Block, Inc.

This action signals heightened scrutiny from state financial regulators on nonbank financial services for potential money laundering and terrorism financing risks, emphasizing the need for robust internal controls. For Vermont consumers, the Department of Financial Regulation provides avenues for submitting complaints about nonbank financial services companies via phone (833-DFR-HOTLINE), email, or an online portal. Consumers can also verify a company's license to operate in Vermont and review past enforcement actions by visiting NMLS Consumer Access, reinforcing the commitment to transparency and consumer protection.

Compliance officers at fintechs and money transmitters should review their BSA/AML programs, particularly regarding customer due diligence and high-risk accounts, given this significant multistate enforcement against Block, Inc. This action signals heightened scrutiny from state financial regulators on nonbank financial services for potential money laundering and terrorism financing risks, emphasizing the need for robust internal controls.

Source: Original reporting via Vermont DFR announcement.