Block, the parent company of Square and Cash App, is currently under intense scrutiny as it faces serious allegations of regulatory violations. A former employee has accused the company of inadequate compliance practices, including the improper handling of transactions related to U.S.-sanctioned countries and facilitating cryptocurrency transactions for terrorist groups. These claims are part of an ongoing investigation by the Southern District of New York, which has yet to comment publicly on the matter.

The allegations involve Block, particularly its Square unit, and are based on accusations from a former employee represented by Edward Siedle, a former Securities and Exchange Commission attorney.

Block is accused of multiple compliance failures, such as insufficient due diligence on international retailers and improper management of frozen funds linked to sanctions violations. There are also claims that the company failed to report thousands of questionable transactions to the government, as mandated by regulations.

These issues have been unfolding over recent years, with the investigation and discussions with prosecutors happening now. The specific timeframe for the alleged violations has not been detailed but includes recent years as noted by Edward Siedle.

The investigation is being conducted by the Southern District of New York, although the compliance issues reportedly span multiple aspects of Block’s operations, including international transactions.

The former employee alleges that the compliance program at Block is fundamentally flawed and is managed by personnel unqualified for regulatory compliance roles in a regulated financial environment. This has purportedly led to significant oversight failures and potential risks to national security and regulatory standards.

According to the former employee’s allegations and documents provided to prosecutors, Block’s internal controls were insufficient to prevent or detect these compliance breaches. In one example, the nature of the Cash app reportedly made it difficult to control or monitor stored balances, which customers often depleted quickly, hindering the company’s ability to effectively manage or freeze questionable funds.

Despite these serious allegations, Block has continued to thrive in certain areas, particularly through Bitcoin sales via its Cash App platform, which reported substantial profits and customer growth in 2023. The company’s recent developments also include the successful design of a cutting-edge bitcoin mining chip, indicating ongoing innovation amid regulatory challenges.

These allegations come at a time of notable changes within Block’s board, with recent departures including that of Lawrence Summers, further compounding the concerns about the company’s governance and oversight capabilities.

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Filed under: Bitcoin - @ May 2, 2024 6:09 pm