LAS VEGAS (KTNV) — Block, Inc., the company that owns Cash App, is having to pay millions of dollars in fines and refunds after failing to adequately protect consumers.
It's part of two separate settlements. The first is with several state regulatory agencies, including the State of Nevada's Financial Institutions Division.
State regulators discovered that Block, Inc. had violated the Bank Secrecy Act (BSA) and anti-money laundering laws (AML) that safeguard the financial system from illicit use.
Under those rules, financial services firms are required to perform due diligence on customers, including verifying customer identities, reporting suspicious activity, and applying appropriate controls for high-risk accounts. State regulators found that Block was not in compliance with certain requirements, creating the potential for its services to be used to support money laundering, terrorism financing, or other illegal activities.
Block agreed to pay an $80 million penalty to state agencies and of that, $1,647,345.83 will be paid to the State of Nevada.
In addition to that, Block has agreed to hire an independent consultant to review the comprehensiveness and effectiveness of their BSA/AML program and submit a report to state regulators within nine months. Block will then have a year to correct any deficiencies found in the review after the report is filed.
The second settlement involves the Consumer Financial Protection Bureau.
"Block employed weak security protocols for Cash App and put its users at risk. While Block is required by law to investigate and resolve disputes about unauthorized transactions, the company's investigations were woefully incompetent," a CFPB press release reads in part. "Block director users — who had suffered financial losses as a result of fraud — to ask their bank to attempt to reverse transactions, which Block would subsequently deny. Block also deployed a range of tactics to suppress Cash App users from seeking help, reducing its own costs."
Bureau officials say that Cash App attempted to avoid many of its investigative obligations through tricking customers with its Terms of Service, deprived users of meaningful and effective customer service, and left the network vulnerable to criminals defrauding users.
As part of this settlement, Block must pay $120 million in refunds to:
- consumers whose unauthorized transfers were not investigated
- consumers who did not receive refunds they were entitled to
- consumers whose accounts were locked for an extended period of time or who were not provided provisional credits during a delayed investigation
Bureau officials say that consumers will not need to take any actions at this time in order to obtain refunds.
As part of a CFPB order, Block must also set up 24-hour, live-person customer service and must fully investigate unauthorized transactions and to provide timely refunds, where appropriate.
In addition to that, Block must pay a $55 million penalty to CFPB's victims relief fund.
Consumers can submit complaints about financial products and services by visiting the bureau's website or by calling (855) 411-2372.
