For the second time this year, Square has found itself in a bit of hot water with a state government for operating its payment service without the proper licensing.
The mobile payments company was hit with an administrative fine of $507,000 by the state of Florida for failing to obtaining a transmitter license. The payment order is dated July 24th, and was recently uncovered by the South Florida Business Journal.
The fine covers a period of over two and a half years, from February of 2010 to November of 2012, during which time Florida accuses Square of obtaining the proper licensing.
“Specifically, the Office finds that Applicant’s existing payment processing services (including Square Register) and stored value/prepaid access card services required a license under Florida law,” it says in the document.
Square agreed to pay the fine through a wire-transfer, though, as the order notes, the company did not actually admit to doing anything wrong.
"Applicant neither admits nor denies, but consents to the Office's finding that Applicant engaged in business as a money transmitter... in the State of Florida without first obtaining a license," it says.
The order also notes that Square did finally applied for a license in November 2012, and that request has now been granted upon payment of the fine.
In addition to the fine, Square also agreed to "amend its Application for Licensure as a Money Services Business, increase its surety bond, and update its record keeping and reporting framework to conform with this Agreement, and as required by the Office and in accordance with Florida law."
"We worked with Florida to resolve our application and receive our license to operate as a money transmitter in the state. We look forward to continuing to help merchants across Florida grow their business with Square," a spokesperson from Square told VatorNews.
Square previously ran into similar trouble in Illinois, which hit the company with a cease and desist order in March for not being properly licensed.
Nobody should feel bad for Square in this situation. You can be sure that the company is not sweating a $507,000 fine, as it is now on track to process $15 billion in transactions this year, or $41 million in payment volume every day. And those figures do not even include the deal that it struck with Starbucks last August, which allowed Square payments in 7,000 Starbucks locations around the United States.
What I find baffling is why Square does not simply comply with these state laws in the first place. Why let it get to the point where it becomes a story that the company is being told by multiple local governments that it is doing something illegal? All that does is hurt Square's credibility.
Founded in 2009, Square has raised over $340 million, most recently a $200 million Series D from Starbucks, CrunchFund, Citi Ventures and Rizvi Traverse Management.
The company had previously raised a $10 million Series A round in 2009, led by Khosla Ventures; a $27.5 Series B round in January 2011, from Sequoia Capital and existing investors; and a $100 million Series C round in June 2011, led by Kleiner Perkins, which led to the company being valued at $1 billion.
The company also received $3 million from Sir Richard Branson in December of 2011.
(Image source: http://mashable.com)