Block Inc: Compliance Dazed and Confused
The Hindenburg report on Block Inc., formerly known as Square Inc., alleges that Block’s Cash App has been fudging its numbers resulting in predatory loans and leading investors astray.
So how did this explosive Zeppelin crash into Block Inc.’s Cash App. According to the Hindenburg investigation:
- Poor compliance allowed customers to, “mass-create accounts for identity fraud and other scams, then extract stolen funds quickly.”
- When customers were caught in fraudulent activity, Cash App simply put the account on the blacklist but did not exit the relationship with the customer.
- Statistics contained fake and duplicate accounts so investors were unaware of the actual number of users.
- The Department of Justice had multiple complaints about Cash App being used to facilitate crimes as heinous as sex trafficking, including sex trafficking of minors.
- Former employees estimated that 40-75% of accounts were phony, involved in fraud, or numerous accounts attached to one particular individual.
- Further, former employees detailed how Cash App censored internal concerns and disregarded user pleas for help as criminal activity and fraud ran rampant on its platform.
- Block Inc. avoided interchange fees by routing funds through smaller banks that fall under the $10 billion in assets cap, so they could charge merchants large interchange fees.
This appears to be a dubious fintech Stairway to Heaven. Lack of Compliance, lack of quality compliance, lack of ethics, or was it just plain and simple, dirtbags doing dirtbag things?
So many red flags were popping up, but someone somewhere decided that profit was much more important than protecting the public with a quality AML program. A dismal AML program allows funds to go to organized crime, cartels, or terrorist financiers and fails to protect our children from the dangers of drugs, protect individuals from human trafficking including children, protect people from crimes, and protect our countrymen from terrorist attacks. Remember – that’s why this AML stuff matters.
Ramble On
There certainly is a tendency in many fields when things go wrong to circle the wagons, admit nothing and attack the accuser. I don’t know if Cash App was deliberate in fraud schemes or just unwitting, unknowing, and/or uncaring about implementing a quality AML program. Perhaps they knew exactly what they were doing and it was profit at any cost. I don’t know. Law Enforcement investigation will dig deeper and maybe someone gets prosecuted. If the allegations are true, there will be no good times, only bad times.
A communication breakdown involving poor compliance can permeate throughout an organization. Compliance starts at the top and rolls downhill. In this case, something rolled downhill, but it was not quality compliance.
President of The AML Training Academy and Advisory LLC
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Kevin Sullivan, CAMS, CCI is a retired 