TLDR
- Block Inc., led by Jack Dorsey, is negotiating with New York regulators to settle allegations concerning its Anti-Money Laundering and Bitcoin programs
- Block previously settled with multiple state regulators for $80 million over AML deficiencies, but New York was not part of that agreement
- In January, the NYDFS proposed settlement terms to Block, though specific details were not disclosed
- Block recently paid $55 million in penalties to the Consumer Financial Protection Bureau over Cash App’s handling of customer complaints
- The company is also in a tax dispute with San Francisco over Bitcoin-related revenue
Block Inc., the payments company headed by Jack Dorsey, is currently in negotiations with New York state regulators to resolve allegations related to its Anti-Money Laundering (AML) and Bitcoin programs.
According to a February 24 filing with the Securities and Exchange Commission (SEC), the company is engaged in “continuing negotiations” with the New York State Department of Financial Services (NYDFS).
The filing reveals that Block is “engaging in conversations with NYDFS to determine whether this matter can be settled on acceptable terms.” While specific details of the potential settlement remain undisclosed, Block confirmed that the NYDFS proposed settlement terms in January, and discussions are ongoing.
Block has set aside funds as a liability for this matter but stated in its filing that it does not consider the amount to be material to its 2024 financial outlook. This suggests the company expects any financial impact from the settlement to be manageable within its current financial projections.
This is not the first time Block has faced regulatory scrutiny over its compliance measures. Between January 2021 and March 2023, the company underwent investigations by money transmission regulators from multiple U.S. states. These examinations reportedly found deficiencies in the firm’s AML Program, particularly concerning compliance with the Bank Secrecy Act.
Settlement Agreement
In January, Block reached a settlement agreement with several state money transmission regulators over these deficiencies. However, New York was noticeably absent from this agreement, choosing to pursue separate negotiations with the company.
As part of the multi-state settlement, Block agreed to pay $80 million in penalties without admitting or denying any wrongdoing. These payments are expected to be completed by February 2025, according to the SEC filing.
The settlement also requires Block to appoint an independent consultant to review and improve its AML Program. Additionally, a Compliance Management Committee has been established to oversee the implementation of corrective measures aimed at strengthening the company’s compliance framework.
Beyond the AML issues, Block is managing several other regulatory and legal challenges. In January, the Consumer Financial Protection Bureau investigated Cash App, Block’s popular payment platform, over its handling of customer complaints and disputes.
This investigation resulted in Block paying a $55 million civil penalty and agreeing to provide between $75 million and $120 million in restitution to affected Cash App customers.
The company is also involved in a tax dispute with the San Francisco Treasurer and Tax Collector. Following an audit of Block’s tax receipts from 2020-2022, the city claims that additional taxes are owed on Bitcoin-related revenue generated by the company during this period.
Block Inc., formerly known as Square, has been expanding its presence in the cryptocurrency space under Dorsey’s leadership. Reports indicate that the company has recently announced a shift in focus, placing greater emphasis on developing equipment for Bitcoin miners and its self-custody crypto wallet.
As these negotiations with New York regulators continue, industry observers will be watching closely to see how Block addresses these compliance concerns while pursuing its cryptocurrency initiatives.
