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Block Inc. has been hit with a combined $255 million penalty by U.S. state regulators and the Consumer Financial Protection Bureau (CFPB) over anti-money laundering (AML) and fraud-related failings linked to its popular mobile payment service, Cash App.
A coordinated enforcement action by financial regulators from 48 states resulted in an $80 million fine for violations of the Bank Secrecy Act (BSA) and AML regulations. Block has also agreed to implement corrective measures, including an independent review of its compliance program.
Separately, the CFPB mandated Block to refund consumers up to $120 million and pay an additional $55 million fine to its victims’ relief fund.
Cash App, which serves over 50 million users, enables consumers to manage payments, investments, and funds. However, financial institutions under BSA/AML regulations are required to verify customer identities, monitor transactions for suspicious activities, and implement controls for high-risk accounts. According to state regulators, Block failed to meet these standards, creating vulnerabilities that could be exploited for money laundering, terrorism financing, or other illicit activities.
As part of the settlement, Block is required to pay the $80 million penalty, hire an independent consultant to evaluate its compliance program and submit a report within nine months. Any deficiencies identified must be rectified within 12 months.
The CFPB’s investigation revealed further lapses, accusing Block of fostering conditions that enabled fraud on its platform. The bureau stated that the company’s security protocols were inadequate, and its dispute resolution processes for unauthorized transactions were insufficient. Customers who experienced fraud were often directed to their banks for recourse, only to have their claims denied by Block.
The CFPB also highlighted Block’s efforts to minimize costs by discouraging customers from seeking assistance. In response, the bureau has ordered the company to establish 24/7 live customer service, conduct thorough investigations of unauthorized transactions, and provide timely refunds when necessary.
“Cash App created the conditions for fraud to proliferate on its popular payment platform,” said CFPB Director Rohit Chopra. “Instead of taking responsibility, the company offloaded its issues onto local banks and failed to uphold its obligations to users.”
This enforcement action comes amidst broader scrutiny of digital payment platforms. The CFPB has also recently filed lawsuits against Cash App rival Zelle and its associated banks, including JPMorgan Chase, Bank of America, and Wells Fargo, over similar fraud-related concerns.
These developments underline the importance of robust compliance programs and consumer protection measures in safeguarding the financial ecosystem against misuse.
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