Federal Prosecutors Investigate Block for Compliance Lapses, Implicated Bitcoin Business

By: Eliza Bennet

Block, previously known as Square, is reportedly under investigation by federal prosecutors due to allegations of major compliance failures, including its Bitcoin business. These allegations suggest the existence of significant lapses in transaction monitoring systems for its main subsidiaries - Square and Cash App.

The probe was launched after a former employee exposed numerous compliance breaches, including transactions involving entities in nations under US sanctions such as Cuba, Iran, Russia, and Venezuela. Block is also accused of neglecting to report crypto transactions linked to groups associated with terrorism. The whistleblower claims that the company did not fix its methods even after identifying the breaches.

The company allegedly allowed customers of Square and Cash App to initiate transactions even after they triggered sanctions alerts. Transfers involving sanctioned entities were reportedly facilitated using different mediums, including Bitcoin. Allegedly, the relevant transactions were not reported to the US government as required, and the company did not rectify its practices upon discovery of the issues.

In response to the allegations, Block has claimed to have a 'responsible and extensive compliance program'. The company has also reported suspicious transactions to Office of Foreign Assets Control (OFAC), resulting in the issuance of a no-action letter. Despite these efforts, the allegations have resulted in significant internal changes at Block and remain a subject of concern for regulators and federal authorities.