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Federal prosecutors are scrutinizing financial transactions linked to Block, a firm founded by Jack Dorsey, focusing on potential violations at its divisions, Cash App and Square.
According to sources, this investigation stems from documents indicating that Block processed crypto transactions for terrorist organizations and Square handled transactions involving countries under US sanctions.
Jack Dorsey’s Block Under Scrutiny
The Southern District of New York’s inquiry began after an ex-employee provided documents revealing that Square and Cash App failed to collect adequate information for risk assessment. The employee claimed that despite being aware, Block did not report numerous transactions involving sanctioned countries to the government as required.
“From the ground up, everything in the compliance section was awed. It is led by people who should not be in charge of a regulated compliance program,” the former employee said.
These allegations come at a time when Cash App boasts 56 million active accounts and processed transactions worth $248 billion last year alone. The platform is popular for its instant money transfer service and ability to purchase Bitcoin and stocks.
Read more: Cash App Review 2023: Everything You Need To Know
Despite its success, Cash App’s design might contribute to compliance risks. Balances are typically depleted before any review can occur, limiting sanctions enforcement’s effectiveness. For this reason, the former employee argued that the compliance lapses were well-known within Block’s leadership circles, including Jack Dorsey.
“Block has a responsible and extensive compliance program and we regularly adapt our practices to meet emerging threats and an evolving sanctions regulatory environment. Our compliance program includes systems, tools, and processes for sanctions screening, as well as investigating and reporting on sanctions issues in accordance with our regulatory obligations,” a Block spokesperson stated.
The potential fallout of this investigation could be significant for Jack Dorsey’s Block as it navigates regulatory challenges and seeks to maintain its reputation. This scrutiny coincides with the resignation of two key board members, intensifying the spotlight on Block’s governance and compliance practices.