Cash App’s Barcelona-based business fined for anti-money laundering and terrorist financing failures, while Hindenburg Research shorts owner Block, citing ‘Wild West’ approach to compliance.

The European arm of Jack Dorsey’s hugely popular Cash App payment software has been slammed by its banking license provider for “serious and systematic infringements of the prevention of money laundering and terrorist financing.”

The reprimand, which came with a $250,000 fine, landed last week from the Bank of Lithuania, which provides a license to Verse, a Cash App company founded in Barcelona, Spain. On Thursday, Hindenburg Research, an activist short seller and investment firm, said it was taking a short position on Block, the owner of Cash App, because of the company’s alleged compliance weaknesses. “Core to the issue is that Block has embraced one traditionally very ‘underbanked’ segment of the population: criminals,” Hindenburg wrote. “The company’s ‘Wild West’ approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly.”


Block hadn’t provided comment at the time of publication.

“The company’s ‘Wild West’ approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams.”

Hindenburg Research

The Bank of Lithuania’s own investigation into Verse’s compliance with its rules on anti-money laundering was launched last year. It found that Verse was failing to sufficiently check the identities of its users, leaving it open to criminal use, with multiple examples of fictitious identities used to open accounts. The company had also “failed to ensure that customers at high risk of money laundering and terrorist financing were subjected to enhanced customer due diligence procedures,” according to the bank’s complaint. Similar criticisms have been leveled at Cash App, as detailed in an investigation by Forbes last year into its anti-fraud mechanisms and abuse by child sex traffickers.

Bruno Hernandez, the former CEO of Verse who oversaw its acquisition by Block in 2020, was also fined €75,000 for failing to address the money laundering concerns, “despite the fact that he had been aware of the irregularities committed by the institution for a long time,” the bank said. Hernandez, who left Block in early 2022, hadn’t provided comment at the time of publication.

The Lithuania bank also noted the Cash App subsidiary didn’t have adequate procedures in place to enforce international financial sanctions. Such failures are of particular concern during a time when multiple sanctions have been filed by the U.S., the U.K. and Europe against Russian individuals and entities following the Ukraine invasion. The bank said Cash App’s company would have to address the issues by April 30 and organize an independent audit to ensure changes have been made. That review will have to be submitted to the bank by October 1, or Block will face further punishments.

Closer to home, Cash App is being investigated by the Consumer Financial Protection Bureau over concerns it was not adequately responding to users’ complaints about fraud and app usability. After launching the case in August last year, the CFPB claimed Block was “slow-walking” its response to requests for documentation.

Hindenburg’s two-year investigation into Block included claims from former employees who estimated that “40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.” Amongst the fakes were accounts for Jack Dorsey, Elon Musk and Donald Trump, many of which appeared to be tied to scams, according to the researchers. Public records requests also showed Cash App was regularly used in pandemic relief fraud, with Massachusetts attempting to get back 69,000 fraudulent unemployment payments sent to Cash App accounts four months into the pandemic, Hindenburg reported.

Despite its troubles, Cash App overtook Square to become the biggest part of Block’s business, generating $850 million gross profit in the fourth quarter of 2022. But on Hindenburg’s release this morning, Block’s shares took a dive falling 20% on the New York Stock Exchange.


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