Federal Prosecutors Are (Still) 'Investigating' Jack Dorsey's Block for Alleged Gaps in Compliance
"Federal prosecutors are digging into internal practices at Block, the financial technology firm launched by Twitter co-founder Jack Dorsey, discussing with a former employee alleged widespread and yearslong compliance lapses at the company’s two main units, Square and Cash App," reports NBC News.
- The report follows another mid-February article from the same author at NBC News, claiming that 'two whistleblowers had told financial regulators about compliance failures at Cash App."
“There are obvious national security issues here and it would be foolhardy for the public to think that regulators and law enforcement are keeping pace with the financial ‘innovators,’” said Edward Siedle, a former SEC enforcement lawyer who represents the whistleblowers.
- "The company said it believed it had voluntarily reported the “thousands of transactions” described by the former employee to the Office of Foreign Assets Control, or OFAC, a department of the U.S. Treasury that enforces economic sanctions. But the former employee disputed that, saying thousands of different transactions were not reported."
“Block has a responsible and extensive compliance program and we regularly adapt our practices to meet emerging threats and an evolving sanctions regulatory environment. Our compliance program includes systems, tools, and processes for sanctions screening, as well as investigating and reporting on sanctions issues in accordance with our regulatory obligations. Continually improving the safety and security of our ecosystem is a top priority for Block. We have been and remain committed to building upon this work, as well as continuing to invest significantly in our compliance program,” said the company's spokeswoman.
- Regulatory scrutiny on the company began in early 2023 with a report by short selling firm Hindenburg Research accusing the Block of misleading "investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government."
- The regulators are also putting pressure on Block's partner banking institutions. Per NBC, the Cash App's banking partner Sutton Bank settled a consent order with the Federal Deposit Insurance Corp. that echoed the whistleblowers’ allegations.
