Venmo, Zelle, Cash App leave consumers vulnerable to fraud, Manhattan DA Bragg says
NEW YORK CITY -- Venmo, Zelle, and Cash App are leaving consumers vulnerable to fraud that's "draining bank accounts of significant sums of money," Manhattan District Attorney Alvin Bragg said in letters to the companies that own those financial apps demanding they increase protections.
Bragg's letters said he was writing "in response to a growing number of incidents" involving fraud and theft "through the exploitation of your company's mobile financial applications on personal electronic devices such as iPhones."
Peer-to-peer payment services now handle an estimated $1 trillion in payments and the district attorney said "frauds and scams have proliferated" as use climbs.
In the past year, there have been thefts stretching from Los Angeles, where several people were robbed of thousands of dollars through Venmo at knifepoint, to Orlando, where a woman had thousands drained from her Venmo after a child asked to use her phone. Similar thefts and robberies have been publicly reported in West Virginia, Louisiana, Illinois, Kansas, Tennessee, Virginia, and elsewhere across the United States.
"These crimes involve an unauthorized user gaining access to unlocked devices and then draining bank accounts of significant sums of money, making purchases with mobile financial applications, and using financial information from the applications to open new accounts," Bragg's letters said. "Offenders also take over the phone's security by changing passwords, recovery accounts, and application settings. The ease with which offenders can collect five- and even six-figure windfalls in a matter of minutes is incentivizing a large number of individuals to commit these crimes, which are creating serious financial, and in some cases physical, harm to our residents."
In New York City, 7 On Your Side spoke to one woman who was scammed.
"I told them I didn't have cash, so they told me they take Zelle or Venmo," said a Zelle victim who didn't want to use her last name.
Scammed in SoHo by a duo we dubbed the "candy kids," Alejandra was sitting in a café when she was approached by two teens who said they were selling candy for their school, but after handing her phone over to donate $5, Alejandra's account was quickly drained to zero. In less than 20 seconds, $1,800 was swiped from her Zelle account, which is the transfer app for Bank of America.
Despite a police report and video proof, Zelle and the bank stuck by their disclaimers warning customers not to send money to individuals they don't know or they could be on the hook for it. Fortunately for Alejandra, we were able to get her money back, but this case represents why Bragg wants the apps to protect its customers better.
The district attorney called on Venmo, Zelle, and Cash App to adopt additional security measures, including imposing limits on transactions, requiring secondary verification of up to a day, and better monitoring of unusual activity.
"I am concerned about the troubling rise in illegal behavior that has developed because of insufficient security measures connected with your software and business policy decisions," Bragg's letters said.
He is requesting meetings with the companies.
A PayPal spokesperson released the following statement:
"PayPal and Venmo take the safety and security of our customers and their information very seriously. In addition to proactively leveraging sophisticated fraud detection tools, manual investigations, and partnering closely with law enforcement agencies to protect our customers against common scams, we have several options in place to enable enhanced layers of security and protection directly within our apps."
A spokesperson for Early Warning Services, LLC, the network operator of Zelle also released a statement:
"We are aware of isolated criminal incidents described in the Manhattan District Attorney's letter. Providing a safe and reliable service to consumers is the top priority of Early Warning Services, LLC, the network operator of Zelle, and our 2,100 participating banks and credit unions. As a result of our continued efforts to build on Zelle's strong foundation of security, less than one tenth of one percent of transactions are reported as fraud or scams, and that percentage keeps getting smaller. Our efforts include implementing industry-leading fraud and scam prevention measures for consumers like in-app safety notifications, and send limits and restrictions. For network banks and credit unions, we're helping to screen out bad actors with free tools. We also invest in ongoing consumer education efforts and have brokered public-private partnerships to do so. All Zelle Network participating financial institutions are required to reimburse consumers for confirmed fraud claims. Consumers should contact the local authorities and their bank and credit union if they were a victim of a crime to begin the claims process."
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