Block transactions reported to be greenlit involving terrorist groups and sanctioned countries

The block appears to be right in the government’s sights. Prosecutors in the Southern District of New York are reportedly investigating extensive compliance gaps at the parent company of Square and Cash App. NBC News says A former Block employee has turned over documents to federal authorities, painting a picture of how the company failed to gather the necessary information to assess risk from customers and subsequently processed illegal transactions.

The documents are said to show that Block has illuminated numerous crypto transactions involving known terrorist organizations. In addition, Square has reportedly processed thousands of transfers involving nations under economic sanctions. “Everything in the compliance department was flawed from the beginning,” the whistleblower claimed NBC News. “It’s run by people who shouldn’t be in charge of a regulated compliance program.”

Most of the transactions allegedly involved credit cards, dollar transfers or bitcoins and were not reported to the government as required by law. Block also reportedly refused to “correct company processes” when notified of the violations.

The investigation follows a separate report from NBC News in February, highlighting two different whistleblowers who noted the same issues in Block. They cited “suspicious Cash App transactions with entities sanctioned by the Treasury Department’s Office of Foreign Assets Control, operations known to sell personal information and credit card data for illegal purposes, and offshore gambling sites, prohibited to US citizens.”

The practice is said to have continued for several years. NBC News says it has reviewed about 100 pages of whistleblower documents involving people or organizations in countries under US sanctions, including Russia, Iran, Venezuela and Cuba. Some of them are reported to be from 2023.

The whistleblower claims that Block’s management was aware of the alleged crimes. “I understand from the filings that the compliance lapses were known to Block’s management and the board in recent years,” said Edward Ziddle, a former SEC attorney representing the whistleblower. NBC News.

The whistleblower says that in addition to senior management, Block’s board has been briefed on the compliance issues. Coincidentally or not, several board members unexpectedly left recently, including former U.S. Treasury Secretary Lawrence Summers, who resigned in February, and Sharon Rothstein, who had been on the board since 2022. Block said NBC News that they are leaving to devote more time to other activities and that their departure is not “the result of any disagreement with the company on any matter related to company operations, policies or practices.”

Federal authorities have taken more interest in modern financial platforms in recent years, after at least some of them have become something of a Wild West. Of course, FTX’s fraudulent practices and the subsequent crash led to a seismic downturn in the cryptocurrency industry. While it’s unclear if the feds got involved, Elon Musk’s X (the shell of what was once Dorsey’s Twitter) reportedly violated US sanctions by accepting blue check subscription payments from terrorist organizations.