WHEN IS CRIMINAL PROSECUTION APPROPRIATE FOR COMPLIANCE MALPRACTICE?

We are closely watching the reports of a developing investigation by American law enforcement of the payments firm BLOCK, formerly known as SQUARE. Allegations, which include massive compliance violations, as well as possible terrorist financing offenses, where crypto is claimed to have played a role in terrorist financing, and sanctions violations on a grand scale, are extremely disturbing. If proven in a court of law, the question arises, should federal criminal charges be brought against the senior compliance officers responsible for such massive violations? There are allegations reportedly made by a whistleblower that appear to justify such action. What does the evidence say?

Indicting compliance officers for money laundering, when they deliberately and intentionally operate an AML/CFT program that is not only ineffective, but designed to evade reporting requirements, is a sensitive issue in our profession. In many cases, it is senior management, often in rampant pursuit of profit, that trumps compliance best efforts, and we are not in possession of all the facts. If it turns out that the fault lies squarely with compliance leadership alone, should deterrence not require that firm action, meaning Federal criminal prosecution, be the response, especially since crypto allegedly played a part ? The use of crypto to accomplish money laundering goals is an aggravating factor that law enforcement simply cannot ignore, given its recent emergence as a central asset in the money laundering toolbox.

We will be monitoring this case, and reporting back to our readers on al developments as they occur. The reported involvement of the US Attorney's office for the Southern District of New York in the investigation is significant, and may provide a clue into the ultimate disposition, and the fate, of the company's compliance leadership; we will be watching.