In a major setback for fintech company Block (NYSE:SQ) , NBC News reported that two whistleblowers have complained to Federal financial regulators that Block’s popular mobile payment platform, Cash App is not conducting satisfactory due diligence on its customers. This has resulted in the platform being potentially used for illegal activities including money laundering and financing of terrorism. The report stated that Federal financial regulators are “exploring” the allegations.
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Shares of SQ were down in trading following the report. Over the past year, SQ stock has plunged by more than 10%.
In the whistleblowers’ complaints reviewed by NBC News, the Cash App program “had no effective procedure to establish the identity of its customers.” In contrast, banks have to verify the identity of each and every customer. The whistleblowers outlined various suspicious transactions through the Cash App that involved entities sanctioned by the Treasury Department’s Office of Foreign Assets Control, as well as operations known for the illicit sale of personal data and credit card information, along with offshore gambling platforms barred to U.S. residents.
In addition, the whistleblowers have claimed that Cash App operated a shadow financial system from 2016 to 2022, lacking due diligence and obstructing regulator oversight through fragmented service providers. The app used different institutions to provide different services to its users resulting in preventing “bank regulators from seeing the full scope of the transactions at the institutions they monitor.”
The whistleblowers have also submitted their complaints to the U.S. Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission.
What is the Future Price of SQ Stock?
Analysts remain bullish about SQ stock with a Strong Buy consensus rating based on 19 Buys and one Hold. The average SQ price target of $85.05 implies an upside potential of 27.8% at current levels.
