Block, Inc., the financial technology company, has reached an agreement with the New York Department of Financial Services (NYDFS) to pay a $40 million settlement. This penalty comes after the NYDFS identified “significant failures” within Block’s anti-money laundering compliance program, the Wall Street regulator announced on Thursday.

According to the NYDFS, Block, the company helmed by Jack Dorsey, will also be required to engage an independent monitor. This measure follows findings that the company violated the Department’s rules for money transmitters and virtual currency businesses.

The NYDFS investigation revealed that Block’s company demonstrated “inadequate customer due diligence.” Furthermore, it was found that the systems Block had in place were insufficient to effectively prevent money laundering and other forms of illegal activity.

The regulator emphasized that Block’s services were “vulnerable to criminal exploitation.” They further explained that Block’s “lax treatment” of Bitcoin transactions allowed a significant volume of largely anonymous transactions to slip through the cracks, avoiding necessary scrutiny.

“It’s crucial that compliance functions keep pace with company growth and expansion,” stated NYDFS Superintendent Adrienne A. Harris in a public statement, highlighting the need for robust regulatory adherence.

Under its much-discussed BitLicense, Block’s popular Cash App has been under NYDFS regulation as a virtual currency business since 2018, underscoring the importance of these compliance measures.

Interestingly, just last year, Cash App discontinued its support for free peer-to-peer (P2P) Bitcoin transactions, even as it broadened its offerings in other cryptocurrency services, aligning with shifting user preferences.

News of the settlement appeared to impact investor sentiment. In early Thursday trading, Block’s share price experienced a downturn of 3.7%, according to data from Yahoo Finance. The stock is currently down 36% when looking at its performance since the beginning of the year.

Edited by James Rubin