South Carolina Attorney General Alan Wilson announced that the Money Services Division of the South Carolina Attorney General’s Office, alongside other states and 47 other state financial regulatory agencies, has reached a significant settlement with Block, Inc. (formerly Square, Inc.), after an investigation revealed violations of the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws.
“Just because a company develops a popular financial service that customers want to use, it does not excuse the company from complying with all regulatory requirements, including laws in place to prevent money laundering,” Department of Financial Institutions, Director Charlie Clark said. “My team, in coordination with other state regulators, will hold companies like Block responsible when they have ignored existing law.”
Block, which operates Cash App, a popular mobile payment service used by more than 50 million consumers across the United States, was found to have failed to comply with key BSA/AML requirements designed to prevent the financial system from being exploited for illicit activities. These regulations mandate that financial firms conduct proper due diligence on their customers, verify identities, report suspicious transactions, and implement controls for high-risk accounts.
Block, Inc., based in Oakland, California, is a nonbanking entity that operates Cash App, a mobile payment platform allowing users to send and receive money through peer-to-peer transactions. Investigations revealed that for several years following Cash App’s launch, Block did not provide adequate customer service, notably lacking live telephone support. This deficiency hindered consumers from resolving their financial issues promptly and led to the emergence of fraudulent customer service lines that compromised users’ personal information, violating the Consumer Financial Protection Act of 2010 (CFPA).
Additionally, findings indicated that Block did not implement timely and effective strategies to prevent, identify, and manage fraud on the Cash App platform, which was deemed unfair and in violation of the CFPA. Another significant issue was Block’s reliance on the card network chargeback process instead of fulfilling its responsibilities under the Electronic Fund Transfer Act (EFTA) and Regulation E to investigate and resolve disputes regarding unauthorized transactions in a timely manner, also breaching the CFPA’s unfair practices prohibition. Furthermore, Block misled consumers by falsely claiming it offered protection against unauthorized transfers and maintained a dedicated phone line for reporting such incidents.
“It is essential that nonbank financial institutions licensed in Arkansas create robust supervisory programs designed to achieve compliance with governing laws,” Securities Commissioner Susannah T. Marshall said in the release. “This collective action by state regulators demonstrates to all institutions that compliance with BSA/AML laws is of critical importance and must remain a top priority for the financial services industry.”
As part of the multistate settlement, Block has agreed to pay an $80 million penalty and hire an independent consultant to assess the effectiveness of its BSA/AML program. The consultant’s findings will be submitted to the state regulators within nine months, and Block will have one year to address any deficiencies identified in the report.
States such as Arkansas, California, Massachusetts, Florida, Maine, Texas, and Washington led the enforcement effort, with Block cooperating fully throughout the process. The settlement aims to enhance regulatory oversight of the company and ensure better compliance with laws designed to safeguard the financial system and protect consumers.
The settlement underscores the importance of coordinated action by state regulators, who oversee the majority of money transmitters in the U.S., to ensure that companies like Block operate in full compliance with safety standards and legal requirements.
This enforcement action highlights ongoing efforts to bolster financial security and accountability in an era of rapid digital payments and mobile transactions. It also sends a clear message that regulatory bodies are committed to holding companies accountable for violations of critical financial laws, no matter how large or widespread their platforms may be.
“We are very pleased with this settlement as it demonstrates the effectiveness of the networked state system
holding a large multi-state company accountable and allows us to take care of any Idaho consumers impacted,”
said Patti Perkins, Director of Finance in the Idaho Department of Finance
Read the Consumer Financial Protection Bureau (Bureau) consent order HERE
