Jack Dorsey’s European Cash App Business Has Been Ordered To Fix Money Laundering Problems

The Cash App’s Spanish company Verse is under pressure to address concerns regarding money laundering.

Verse is one of the European mobile payment service which is part of Jack Dorsey’s $50 billion fintech firm Block. He was told that its regulator for financial services must address issues regarding money laundering and check its users’ identities. If it fails to do so the company will face a fine which could include the possibility of a penalty of a fine Forbes is discovered.

The company was acquired from Block at the end of 2020. the Barcelona-based Verse is essentially the same as Cash App, the payments company it operates under that provides a speedy and straightforward way to transfer funds via mobile devices. While Cash App is accessible within the U.S. and the U.K., Verse is utilized across Europe as Block’s strategy to increase business opportunities on the continent. Consumers wildly love peer-to-peer payments, but more and more European regulators are looking at the potential risks associated with this technology, according to Kathryn Westmore, a former PwC fraud investigator. Mainly there is “huge worry” about verifying users’ identities when it comes to fraud added.

On the 29th of December 2021, Verse received a “mandatory directive” notice from its European financial institution, that is, the Bank of Lithuania, which fintech companies frequently utilize since it allows rapid access to access to the European market. The Vilnius establishment supplies Verse with its license for electronic money institutions in Europe and oversees the compliance of financial laws. The company was given till July 2022 to address concerns regarding the security of its customers’ identities. In not doing so, Cash App’s subsidiary business was at risk of violating laws against money laundering and financing terrorists. Laws. In its document, it was noted that the institution offered little information on which customers it was concerned about or what particular updates for identity verification it needed from Verse.

Helen Prowse, a Block spokesperson, claimed that the company had already implemented crucial improvements to meet the bank’s request and noted that “continuous review and improvement in our efforts to combat money laundering strategy and fighting the financing of terrorist methods is a major issue for Block.”

An individual aware of the investigation but was not authorized to speak on the public record claimed that Cash App compliance staff had visited Verse in Spain in the spring of this year to help respond to the notification. Giedrus Sniukas, an official spokesperson from the Bank of Lithuania, told Forbes that the bank was looking into whether the required changes were implemented. “Regarding the obligatory instruction, it was connected to the processes for identifying clients that did not meet the requirements of the law,” he said. “The firm was instructed to review its procedures but not to offer services to clients whose identities were not properly verified.”

“If you’ve had your license taken away, it could be difficult to determine how you can quickly return to the business.”

Kathryn Westmore, a former PwC fraud investigator

Although the Bank of Lithuania published a brief statement on its issues in connection with Verse in December, no mention was made of Cash App or its owner, Block. It is the first time Cash App’s participation in the bank’s decision has been publicly revealed. Block was a public company listed on the New York Stock Exchange and was not mentioned in the SEC filings.

Based on Francine Mckenna, who is a financial accounting professor at the University of Pennsylvania Wharton Business School & the University of Pennsylvania Wharton Business School, disclosures included in SEC filings are required only in cases where it’s “reasonably feasible” that a violation of the law could cause a measurable loss. “Sometimes the SEC initiates investigations and issues subpoenas to companies, but they don’t reveal. A warning by an enforcement agency regarding the possibility of a more serious criminal offense similar to money laundering, however, it’s only a warning,” she added.

A Bank of Lithuania spokesperson Sniukas claimed he could not explain what prompted the bank to make the decision. He said that if a firm does not respond to the bank’s concerns, it could be punished with an administrative fine or suspension of the bank’s banking license, although it’s much less likely because of the seriousness of the measures. In previous punitive actions for money laundering issues, the bank has imposed small fines, most recently on another European fintech company, Revolut, which was hit with a fine of EUR200,000 in March for failure to implement “internal controls for the prevention of terrorist and money laundering financing.”

The fines, as well as the reputational damage, do not are a significant threat to companies who violate the law against money laundering, according to Westmore, a former fraud investigator who is now a senior research fellow at the financial crime center of U.K.-based think group RUSI. Banks also have the authority to cancel or suspend an authorization, which can constitute a real risk, Westmore added. “If you’ve had your license taken away, it’s going to be difficult to determine the way to be able to get back in your business quickly,” Westmore said. “Frankly no one will wish to get in touch with your business.”

When Block, formerly known as Square, announced its Verse purchase in the year 2020, the company promised it would ensure that the business, which collected nearly $40 million before when it was sold, that was going to continue operating independently. Since the initial concerns regarding money laundering surfaced in Lithuania in the early part of the year Block has had to replace its chief executive Bernardo Hernandez. Its chief technology director, Bernardo Hernandez. Both had not commented regarding the reasons for their departure at the time publication. Verse. me’s Verse. me team page does not include a CTO or CEO and indicates that there are no replacements. Block was not available to discuss the changes in Verse management but did say the company has hired Conor Walsh, the head of the global development of Cash App, as general manager of Verse.

Block has issues closer to the San Francisco headquarters with Cash App, which was about half of the Dorsey company’s $1.5 billion quarterly earnings in its most recent numbers. Because of concerns about fraud, a few American merchants are restricting or blocking credit and debit cards that Cash App provides, as per a Forbes article earlier this year. Block stated that it was concerned about the fraud and had dedicated staff within the Cash App to resolve its merchant concerns.

The SEC report disclosed the information in the spring of this calendar year. Cash App is also being investigated by the Consumer Financial Protection Bureau and various state Attorneys General regarding how it handles customer complaints and disputes. The consumer watchdog alleged that Cash App was failing to submit evidence to the probe and the company claimed the company was “disappointed” since it believed that it had been in constant dialogue, and said that it was in fact waiting for the CFPB to provide a response to its latest timeline proposal. In September, a group action suit was filed, claiming “negligent” protection related to a security breach that revealed data of more than eight million Cash App Investments users in December. Cash App declined to comment regarding the lawsuit.

- Advertisement -
Adam Collins
Adam writes about technology, business and economics. With master's degree in Economics, he's presented six papers in international conferences. As a solivagant in the constant state of fernweh, curiosity is the main weapon in his arsenal.

Latest articles

Related articles