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Federal prosecutors are currently investigating financial transactions at Block, the cryptocurrency company founded by Twitter co-founder Jack Dorsey. The investigation focuses on alleged compliance deficiencies at the company's two main units, Square and Cash App.
A former employee provided documents to prosecutors for the Southern District of New York that purported to show that insufficient information was collected from Square and Cash App customers to assess their risk. The documents also allege that Square processed thousands of transactions involving countries subject to economic sanctions, and that Block processed numerous cryptocurrency transactions for terrorist groups.
Many of the transactions discussed with prosecutors, including credit card transactions, dollar transfers and Bitcoin, were not properly reported to the government. The former employee alleges that Block failed to correct company processes when alerted to these violations.
The nearly 100-page document provided to NBC News identified transactions, mostly in low-dollar amounts, involving entities in countries subject to U.S. sanctions restrictions, such as Cuba, Iran, Russia and Venezuela, until last year.
“Everything in the compliance department was flawed from top to bottom. It's run by people who shouldn't be responsible for a regulated compliance program,” the former employee told NBC News. This assessment was echoed by a second person with direct knowledge of Block's monitoring programs and practices.
“My understanding from the documents is that the deficiencies in compliance were known to Block leadership and the board in recent years,” said Edward Siedle, a former Securities and Exchange Commission attorney who represented the former employee.
In response to the inquiry, a Block spokesperson said:
“Block has a responsible and comprehensive compliance program, and we regularly adapt our practices to meet emerging threats and the evolving sanctions regulatory landscape. Our compliance program includes systems, tools and processes for sanctions screening, as well as the investigation and reporting of sanctions matters in accordance with our legal obligations.” “Continuously improving the safety and security of our ecosystem is a top priority for Block, and we are committed to improving this work as well as continuing to invest significantly in our compliance program.”
*This is not investment advice.