Block Sets Aside $764 Million for DOJ Probe Over Anti-Money Laundering Lapses

Block Inc., the U.S. fintech company led by Jack Dorsey, increased its reserves to address a U.S. Department of Justice investigation into alleged anti-money laundering compliance failures.

Bloomberg reported on November 3 that Block said in a recent filing it had reached an agreement in principle in October with the Justice Department on a deferred prosecution agreement over deficiencies in its anti-money laundering program.

The agreement is tied to allegations that Block failed to maintain an effective anti-money laundering framework as required under the Bank Secrecy Act. Under the terms, the Justice Department would defer prosecution on the allegations for three years. The agreement still requires court approval to become final.

According to the filing, the total financial cost tied to the agreement is expected to be about $964 million. The actual net payment is projected at about $764 million.

Block raised the related reserve to $764 million at the end of September from $526 million at the end of June. The increase reflected the expected payment under the agreement with the Justice Department.

U.S. financial authorities have recently stepped up penalties for major financial institutions that violate anti-money laundering and sanctions compliance rules. In October, Bank of America was fined $1.21 billion for violations of anti-money laundering and sanctions rules. It was the largest regulatory fine imposed on the bank in the past decade.

American Express was also fined $350 million for failing to properly detect and report suspicious money laundering transactions. Block's agreement comes as U.S. financial authorities tighten oversight of anti-money laundering controls.