Trending: Cash App Facing Federal Investigations Over KYC Shortcomings

Trending: Cash App Facing Federal Investigations Over KYC Shortcomings

As everyday technologies continue to become more user-friendly and optimize daily activities for businesses and consumers alike, the growth in both scope and utilization of peer-to-peer (P2P) payment systems in the realm of digital finance has all but replaced traditional cash and check-based transactions in the modern economy. The global P2P payments market size currently sits at $2.95 billion, with this figure expected to rise at a compound annual growth rate of 15.1% per year, and likely to eclipse the $8 billion mark by 2030 alone. These numbers are largely backed by increased smartphone adoption by the masses, as well as perceived improvements in data security when utilizing online financial services, and are expected to be further bolstered by ongoing developments in the cryptocurrency space as well as in cross-border payment facilitation. Yet while cash remains the vehicle of choice in the criminal economy, the unprecedented growth in this sector has drawn increased attention to P2P payment systems by financial criminals, culminating in higher risk for both individuals and businesses using these services.

Financial fraud came to the forefront of American discussion during the Covid pandemic. With brick-and-mortar stores forced to temporarily close their doors, use of online services skyrocketed across a number of sectors. These developments coupled with an increase in free-flowing “relief” funds offered by the federal government through the $2.2 trillion CARES Act to individuals (in the form of stimulus checks) and businesses (in the form of the Paycheck Protection Program) led to a surge in illicit financial activity domestically. During this period, criminals took advantage of loopholes provided by popular payment apps such as Cash App, Venmo, Zelle and PayPal to exploit unsuspecting individuals – as well as the federal government – and subsequently launder money. Various government agencies ultimately became inundated with fraud cases related to these free funds as they were unable to keep pace with criminals finding ways to claim aid that was supposed to be going to those who actually needed it. They would then use payment apps like Cash App to launder the funds and make it difficult for law enforcement to establish a paper trail, leaving them unable to trace their source and allowing illicit funds to enter the domestic financial system unimpeded.

Fast forward to 2024 and AML protocols for P2P exchanges remain challenging to navigate given that differing standards exist across the multitude of platforms currently available. While domestic banks are subject to regulatory procedures bound by the Bank Secrecy Act (BSA) that include staunch identity verification (KYC) requirements, set regulations for the P2P sector are not nearly as standardized. This has opened the door for money laundering, terror financing initiatives and other illicit activities, a development highlighted in allegations highlighted in an investigation initiated by federal regulators just this past week. The popular service Cash App came under fire recently as two whistleblowers came forward with claims that the mobile payment platform and the entities providing transaction services to its users had no effective procedure to establish the identity of its customers, which could have allowed for millions of dollars worth of illegal activity to take place over the past several years. NBC News writes that the whistleblowers involved have detailed “an array of questionable Cash App transactions with entities under sanction by the Treasury Department’s Office of Foreign Assets Control, operations known to sell personal information and credit card data for illegal purposes, and offshore gambling sites barred to U.S. citizens.”1

The whistleblowers formally filed their complaint with the Treasury’s Financial Crimes Enforcement Network (FinCEN), with the claims set to be investigated by internal operatives as well as other appropriate financial regulators based on the reach of their accusations. The case becomes more substantial when considering that several of the affiliates of Cash App that help with facilitating payments are multinational conglomerates such as Via and Wells Fargo, with many speculating as to the potential impact these claims may ultimately have on these entities from a compliance perspective. Cash App’s use of different institutions providing services for users further prevents bank regulators from seeing the full scope of the transactions at the institutions they monitor, leading to even less oversight and greater potential for unchecked wrongdoing. Reports have indicated that the whistleblowers also made submissions of due diligence failures to the Securities and Exchange Commission and the Commodities Futures Trading Commission.

All told, Cash App holds 55 million active transacting accounts with $239 billion of inflows in the past year, according to them. As such, federal regulators are taking the accusations by these whistleblowers very seriously, especially given the history of abuse that P2P platforms have seen since the turn of 2020 alone. The unnamed individuals have also alleged that Cash App does not adhere to sound banking practices and rules that are enforced in traditional banking, going as far as to say that Cash App has been operating in “a shadow financial system beyond the reach of regulators” from at least 2016 to 2022.

So far, representatives from Cash App have issued a lone statement on these accusations, stating the following when asked to comment:

“The bank partnership model allows Cash App to offer certain financial services products (such as the Cash App Card) that are a benefit to our customers and further our purpose of economic empowerment,” the statement said. The company performs due diligence on customers, the statement continued, employing “several hundred people who support Cash App’s Know Your Customer/due diligence, anti-money laundering and related compliance functions, and augment that workforce with supplemental staffing and resources.”1

Global RADAR will provide additional updated on this case as they become available.


  1. Morgenson, Gretchen. “Feds Probing Whether Cash App Leaves Door Open to Money Launderers, Terrorists.” NBCNews.Com, NBCUniversal News Group, 16 Feb. 2024. 

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