US federal prosecutors are investigating the financial transactions of Block, the firm co-founded by Twitter's Jack Dorsey, according to NBC News. Findings from internal documents reportedly indicate compliance issues at Square and Cash App. The documents provided by a former employee highlighted inadequate collection of customer information and processing of transactions involving sanctioned countries.

Alleged Compliance Failures

The former employee alleges that despite being alerted to compliance breaches, Block did not rectify its processes. Thousands of transactions, including credit card transactions, dollar transfers, and Bitcoin transactions, went unreported to the government. The documents point to transactions with countries like Cuba, Iran, Russia, and Venezuela, raising concerns about regulatory compliance.

According to the sources cited by NBC News, Block's compliance section faced significant flaws, such as a lack of leadership capable of overseeing a regulated compliance program. An external consultant identified nearly 50 deficiencies in the systems for monitoring suspicious activities and screening for sanctions violations.

The Block’s board and senior management were reportedly aware of the compliance lapses. The recent departures of directors Lawrence Summers and Sharon Rothstein raised questions about governance and oversight within the company. The audit committee, overseen by Lord Paul Deighton, was responsible for reviewing the company's risk assessment and management policies.

Regulatory Scrutiny

In 2021, its European version of Cash App faced fines for violations of money laundering and terrorism financing regulations. Regulators are concerned about mobile payment platforms like Cash App.

However, Block responded that it has a robust compliance program and regularly updates its practices to meet regulatory requirements. It acknowledged deficiencies identified by the former employee but disputed their interpretation, emphasizing its commitment to compliance and ongoing efforts to improve its systems.

Expect ongoing updates as this story evolves.