According to a report from NBC, federal prosecutors have launched an investigation into Block, the financial technology company founded by twitter co-founder Jack Dorsey, following allegations of compliance failures and links to terrorist networks through alleged crypto transactions.
In particular, a former Block employee provided documents to the Southern District of New York revealing noncompliance, improper collection of customer information, and the processing of crypto transactions for sanctioned countries and terrorist groups.
bitcoin transactions linked to terrorism revealed
According to him report, the former employee revealed that Block's units, Square and Cash App, failed to collect enough customer information needed to assess risks. Additionally, Square processed thousands of transactions involving countries subject to economic sanctions, including Cuba, Iran, Russia, and Venezuela.
Documents provided to prosecutors identified numerous “small amount transactions” with entities in these sanctioned countries, some as recent as last year. The former employee stressed that the management of the Block and the board of directors were aware of these non-compliance..
The investigation also revealed that the company founded by Jack Dorsey processed multiple crypto transactions for terrorist organizations, raising significant concerns about the company's compliance and due diligence practices.
The former employee alleged that most transactions involving bitcoin, credit cards, and dollar transfers were not reported to the government as required. Block allegedly failed to rectify identified violations, even after being alerted.
According to the former employee and a second person familiar with Block's monitoring programs, the company's compliance arm was deemed “fundamentally flawed.”
Both sources expressed concerns to NBC about responsible leadership of the regulated compliance program. The former employee, supported by the findings of an outside consultant, identified nearly 50 deficiencies in Block's systems for monitoring suspicious activity, assessing customer risk, and detecting sanctions violations.
Uncertain future for Jack Dorsey's block
When NBC questioned Block about the ongoing investigation, Block defended its compliance program and highlighted its commitment to adapting practices to developments. sanctions regulations and emerging threats.
The company affirmed a comprehensive compliance program that incorporates systems, tools and processes for sanctions detection and reporting.
Block claimed that his voluntary disclosure to the Office of Foreign Assets Control (OFAC) resulted in a no-action letter indicating the closure of an investigation with no administrative action taken.
Jack Dorsey's company has faced regulatory challenges in the past. The Bank of Lithuania's Financial Market Supervision Committee ordered Verse Payments Lithuania UAB, Block's European equivalent to Cash App, to address identity verification issues related to existing customers.
The company shut down P2P payments app Verse last year due to alleged “disappointing” growth and cost effectiveness. Additionally, two directors, Lawrence Summers and Sharon Rothstein, unexpectedly left Block's board of directors.
However, both directors emphasized that their departures were not related to disagreements with the company's operations, policies or practices.
The federal investigation into the Jack Dorsey Block underscores serious allegations of compliance failures and connections to terrorist networks through cryptographic transactions.
The investigation highlights the company's alleged improper collection of information, violations of economic sanctions and failure to report suspicious transactions. As the investigation progresses, the implications for Block's operations and regulatory situation remain to be seen. At the time of writing this article, Jack Dorsey has not issued any official statement on the matter.
Featured image from LA Times, chart from TradingView.com
