Block, the company behind the popular mobile payment service Cash App, has been hit with a $40 million fine. This penalty was issued by New York’s financial watchdog, the Department of Financial Services (DFS). The reason? Block failed to properly stop illegal money activity on its platform.
Cash App, which lets people send and receive money on their phones, has grown very fast over the last few years. It also allows users to buy and sell Bitcoin. But according to the DFS, as the app got bigger, the company didn’t do enough to keep a close watch on how people were using it.
Between 2018 and 2021, thousands of red flags were raised about suspicious transactions. These alerts are supposed to help stop things like terrorism funding and other illegal money movements. But instead of acting fast, Cash App often let these warnings sit untouched — some for over a year. By 2020, the backlog had grown to more than 169,000 alerts.
The DFS found that Block didn’t have a strong system to figure out the risks of certain types of transactions. That means the company wasn’t doing enough to prevent shady activities. For example, transactions involving tools called “mixers” — which can hide where money comes from — were marked as only “medium risk.” But the DFS says these should have been treated as “high risk” because they can be used to cover up crimes.
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Gaps in Customer Safety
One of the biggest problems pointed out by the DFS was how Block managed customer information. Companies like Cash App are supposed to follow “Know Your Customer” (KYC) rules. These rules help make sure that people using the app are who they say they are. It also helps prevent fraud and money laundering.
However, the DFS says Block didn’t properly check the identity of its users. There were big holes in how the company verified customers and monitored their activity. Because of this, many transactions were done anonymously, with little to no tracking of who was sending or receiving the money.
The DFS also raised concerns about how Cash App responded to alerts of suspicious behavior. Not only were response times incredibly slow, but there were also no proper procedures to take action once a problem was found. Without clear steps, alerts often piled up with no one reviewing them. This kind of delay gives criminals a chance to move money without getting caught.
The Outcome and Company Response
Block agreed to pay the $40 million fine to New York’s Department of Financial Services. But this isn’t the first time the company has faced trouble over its money-monitoring practices. Earlier in January, Block also agreed to pay $80 million to several U.S. states for similar issues.
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As part of the settlement with New York, Block has been ordered to bring in an outside expert. This expert will help monitor Cash App’s activity and ensure better safety checks are in place. The goal is to fix the flaws in how the company tracks money movement and confirms the identity of its users.
In a statement, the company said that this fine puts an end to all the earlier problems it had with state money licenses. Block also said that it has already spent a lot of money and effort to improve its systems. The company claims it is taking the issue seriously and is working hard to keep the financial system secure.
Still, the DFS made it clear that Cash App’s lack of proper systems was dangerous. Loose rules and a lack of strong checks allowed illegal transactions to go unnoticed. The fine is meant to hold the company accountable and send a message to others in the industry.
Though Block disagreed with the decision, it says it is committed to fixing the problems and cooperating with the authorities. Meanwhile, the DFS continues to watch closely as Block takes steps to clean up the mess.
