Block (NYSE:SQ) stock is down more than 8% in the afternoon session on news that federal prosecutors are probing financial transactions at the fintech company.

Specifically, early reports indicate that prosecutors are considering certain crypto transactions that may have ties to terrorist groups. The probe will also indicate whether any transactions were processed in violation of economic sanctions put in place.

Various compliance lapses noted by a former employee could have led to such transactions taking place. And while we are still waiting on more concrete details regarding what prosecutors are examining, it is clear the market is reacting poorly.

How should investors process the move today in SQ stock?

SQ Stock Plunges on Reports of Probe

This report from NBC News is certainly not what investors want to see. Compliance lapses happen in any organization from time to time. But allegations of widespread issues are a different story.

One noteworthy detail is that many transactions under scrutiny were in small dollar amounts. However, another detail is that many countries involved in these allegations are on the U.S. sanctions list, including Venezuela, Iran, and Russia.

Because of this, investors fear that the problems are systemic with the overall compliance structure at Block. The former employee alleged that those in charge of compliance were not qualified.

For now, this news is still developing. Until we receive further details on these breaches, I think waiting on the sidelines with SQ stock makes the most sense.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.