Federal prosecutors are investigating financial transactions at Block, the owner of Cash App and Square

**Uncovering Compliance Lapses at Block: What Investors Need to Know**

Federal prosecutors are currently examining internal practices at Block, the financial technology firm founded by Twitter co-founder Jack Dorsey. A former employee has come forward with allegations of widespread compliance failures at Block’s main units, Square and Cash App. These lapses include insufficient customer information collection, processing transactions involving countries under economic sanctions, and handling cryptocurrency transactions for terrorist groups.

The former employee provided prosecutors with documents showing that many transactions, including credit card, dollar transfers, and Bitcoin transactions, were not reported to the government as required. Furthermore, the compliance program at Block was reportedly flawed from the ground up, with key individuals lacking the expertise to manage a regulated compliance program.

Block has stated that it has an extensive compliance program in place and regularly adapts its practices to meet regulations. However, the former employee’s documents highlight numerous deficiencies in the company’s compliance systems, with instances of inadequate due diligence on international merchant sellers, improper fund reimbursements, and customers conducting transactions despite sanctions alerts.

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Additionally, Cash App’s design seems to increase the risk of compliance lapses, as customers often do not leave stored balances in their accounts for extended periods, limiting the company’s ability to block or reject funds. An independent consultant hired by Block identified almost 50 deficiencies in its systems for monitoring suspicious activities and screening for sanctions violations, indicating a need for significant improvements.

In response to the allegations, Block has emphasized its commitment to compliance and stated that it cooperates with legal experts to address identified deficiencies. The company believes it has voluntarily reported thousands of transactions to the Office of Foreign Assets Control (OFAC), although the former employee disputes this claim.

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These revelations come amid the unexpected departures of two Block directors and enforcement actions by financial authorities in Europe. The company’s European version of Cash App, Verse Payments Lithuania UAB, was ordered to address violations related to money laundering and terrorist financing. Block’s decision to shut down Verse last year was attributed to a lack of expected growth and profitability.

As investors, it’s essential to closely monitor developments at Block and assess the potential impact of compliance issues on the company’s financial stability and reputation. Strong compliance practices are critical for regulatory compliance and safeguarding investor interests. Stay informed and stay tuned to Extreme Investor Network for the latest updates on Block and other key players in the financial technology industry.

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