Connecticut settles with Block, Inc., owner of Cash App, for violations and security breaches
Connecticut, along with 49 other states and the District of Columbia, recently concluded a collaborative enforcement action against Block, Inc., the parent company of Cash App, that culminated in an approximately $80 million settlement for regulatory violations involving the Bank Secrecy Act and anti-money laundering regulations. The Connecticut Department of Banking revealed that the state is poised to receive $1.6 million from this settlement, which will be channeled into the state’s general fund.
Subsequently, Block agreed to pay $79.07 million in administrative penalties along with $925,000 in costs. These penalties resulted from the company’s failure to implement effective compliance programs, leaving loopholes open to money laundering and other illicit financial activities. As a corrective measure, Block committed to a remedial action plan, which includes enlisting an independent consultant to evaluate its compliance status and providing regular progress updates to regulatory authorities.
Connecticut’s Banking Commissioner, Jorge Perez, expressed gratitude for the collaborative effort among regulators to bring about this enforcement action. Perez emphasized the critical role of state financial regulators in safeguarding consumers and upholding the integrity of the financial system, particularly concerning the expanding landscape of financial services. The department remains vigilant in enforcing financial laws to prevent malicious actors from exploiting the financial system.
The initiative, spearheaded by state regulators from Arkansas, California, Massachusetts, Florida, Maine, Texas, and Washington, signifies a comprehensive multistate response to ensure compliance with financial regulations and to clamp down on illicit financial activities across jurisdictions.
According to disclosures with the U.S. Securities and Exchange Commission, Cash App, as of December 2023, boasted 56 million monthly transacting users, with transaction inflows topping $248 billion that year. This widely used platform operates across all 50 states, providing a broad user base with financial transaction services.
In a related development, the Consumer Financial Protection Bureau (CFPB) has demanded that Block refund up to $120 million to consumers and remit an additional $55 million penalty to the CFPB’s victims relief fund owing to severe security lapses. The CFPB’s investigation revealed significant security vulnerabilities in Cash App due to weak security protocols, exposing users to fraud risks. Despite being legally obligated to probe unauthorized transactions, Block fell short in conducting thorough inquiries and frequently dismissed claims from users who suffered financial losses.
CFPB Director Rohit Chopra criticized Cash App for fostering a conducive environment for fraud on its payment platform and a disregard for its obligations during security breaches. Cash App’s failure to uphold its responsibilities not only jeopardized users but also imposed burdens on local banks due to these security oversights.
