Block, the parent company of Square and Cash App, is under investigation for compliance failures related to insufficient customer risk assessments involving sanctioned countries such as Cuba, Iran, Russia, and Venezuela.

A former employee provided CNBC with over 100 pages detailing transactions involving bitcoin, credit cards, and transfers that were not reported to the government.

“From the ground up, everything in the compliance section was flawed,” the former employee said. “It is led by people who should not be in charge of a regulated compliance program.” 

Edward Siedle, a former SEC lawyer who represents the former employee and participated in the discussions with prosecutors, said: “It’s my understanding from the documents that compliance lapses were known to Block leadership and the board in recent years.”

Asked about the probe, a Block spokeswoman provided the following statement: “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.”

Two whistleblowers informed financial regulators about compliance failures at Cash App in February. The design of the app reportedly increased the risk of compliance lapses.

Next UK government encouraged to support regulators during transition phase

Experts have put forward thoughts on how fintech can fuel innovation in the wider economy, including recommendations for appropriate fintech and open banking regulation.

The Director of Government Innovation at the Tony Blair Institute for Global Change collaborated with the Fintech Policy Lead and Deputy Policy Director at the Startup Coalition to produce A Progressive Vision for Fintech.

A future government must build export opportunities for fintechs into its trade agency, starting with open banking regulatory bridges, the authors say. This involves working with key international markets and maintaining existing ‘fintech bridges’.

“Ww have exported our regulations and standards across the globe, with over 40 countries operating a form of regulated scheme globally.”

A Progressive Vision for Fintech

The proposals come as the UK anticipates a general election in the second half of 2024, with a change of government strongly predicted.

“International cooperation works best where there is regulatory alignment, and in the case of Open Banking, we have exported our regulations and standards across the globe, with over 40 countries operating a form of regulated scheme globally,” the authors say.

The UK should also forge regulatory agreements internationally, and the next government must provide regulatory certainty through regular updates for policymakers and industry on upcoming initiatives, the report advises. This should come in the form of a bi-annual Policy Initiatives Grid.

The FCA should also be supported in accelerating work on its backlog during the transition to a new administration.

“Labour supported the 2023 Financial Services and Markets Act, and has stated explicit support for the new regulators’ secondary objective of international competitiveness and growth. We also know that they are meaningfully engaged in some of the meatier policy conversations around regulation of Buy Now, Pay Later, and Open Banking,” the authors say.

“Stability in policy work is also important for the regulator itself, with many firms stressing the need to set the FCA, Prudential Regulation Authority (PRA), and the Payment Systems Regulator (PSR) up for success with as little policy disruption as possible.”

This includes proceeding with key policies like the Edinburgh Reforms and providing more substance and certainty to the form of the Consumer Duty.