Jack Dorsey’s fintech firm Block is being probed by federal prosecutors after a former employee claimed that “everything in its compliance section was flawed” and that it’s “led by people who should not be in charge of a regulated compliance program.”
As reported by NBC, the whistleblower also claimed that Block and its business units Cash App and Square transacted crypto for terrorists, facilitated payments for sanctioned countries, and flouted compliance protocols.
The whistleblower — a former Block employee — reportedly provided 100 pages of documents to prosecutors from the Southern District of New York that show the alleged malpractice.
The documents allegedly detail how Block processed numerous crypto transactions for terrorist-designated groups. Meanwhile, Square and Cash App allegedly failed to collect relevant information from customers that would help assess risks.
Square also reportedly facilitated thousands of transactions with countries under economic sanctions.
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Despite being alerted to these alleged breaches, the whistleblower says the Block failed to change any company processes. They claim that a mix of the transactions discussed with prosecutors, including bitcoin, credit card, and dollar transfers, were not reported to the government under law.
They told NBC News, “From the ground up, everything in the compliance section was flawed. It is led by people who should not be in charge of a regulated compliance program.”
These allegations of an inadequate compliance program echo claims from a research report published last year by short-sellers Hindenburg Research. This report alleged that “Cash App suppressed internal concerns and ignored user pleas for help as criminal activity and fraud ran rampant on its platform.”
Block execs allegedly knew compliance pitfalls
The former employee’s lawyer, Edward Siedle, who previously represented the Securities and Exchange Commission, said, “It’s my understanding from the documents that compliance lapses were known to Block leadership and the board in recent years.”
A Block spokesperson told NBC News it voluntarily reported ‘thousands’ of the flagged transactions to the Office of Foreign Assets Control. The former employee, however, says this isn’t true.
The spokesperson added, “Block has a responsible and extensive compliance program and we regularly adapt our practices to meet emerging threats and an evolving sanctions regulatory environment.
“Continually improving the safety and security of our ecosystem is a top priority for Block. We have been and remain committed to building upon this work, as well as continuing to invest significantly in our compliance program.”
