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Cash apps not doing enough to protect users, prosecutor says

The Manhattan district attorney sent major cash apps a letter imploring them to make security changes.
Venmo app logo on an iPad.
Posted at 11:06 AM, Jan 24, 2024

Manhattan District Attorney Alvin Bragg is urging popular online applications such as Venmo and Zelle to do a better job at protecting consumers from fraud.

In a letter to Venmo, Zelle, and Cash App, Bragg said New York is among many cities getting reports of people having their bank accounts drained by scammers. 

He said fraudsters commonly ask to use someone's smartphone and quickly go into the apps to transfer money. 

"While cash apps, like Cash App, offer consumers an easy and fast method to transfer funds, they also have made these platforms a favorite of fraudsters because consumers have no option to cancel transactions, even moments after authorizing them," Bragg said in the letter. "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."

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In the letter,Bragg urged these apps to make several security adjustments. Bragg asked the companies to require a separate password for accessing the app on a smartphone as a default security option. He also wants mandatory wait times and secondary verification of up to a day for large monetary transactions. 

Bragg also asked for these companies to impose default lower limits on the monetary amount of total daily transfers.

“No longer is the smartphone itself the most lucrative target for scammers and robbers — it’s the financial apps contained within," Bragg said in a statement. "Thousands or even tens of thousands can be drained from financial accounts in a matter of seconds with just a few taps. Without additional protections, customers’ financial and physical safety is being put at risk. I hope these companies accept our request to discuss commonsense solutions to deter scammers and protect New Yorkers’ hard-earned money.”

Scripps News has reached out to the three companies for their reaction.

"Cash App continues to be committed to building trust with our customers and investing in areas that help build a safe and secure platform," a Cash App spokesperson said. "We work proactively and diligently to safeguard our customer’s money and mitigate against the risk of fraud on our platform through a combination of preventative controls like multi-factor authentication, account transaction limits, fraud detection, and consumer education. We also partner with law enforcement agencies to detect and combat criminal activity." 

Early Warning Services, LLC, on behalf of Zelle, said, "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."

"PayPal and Venmo take the safety and security of our customers and their information very seriously," PayPal said in a statement. "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.”

The threat of fraud is among several concerns officials have noted about cash apps. Last year, the Consumer Finance Protection Bureau warned consumers that funds in cash apps could be lost if one of those apps were to ever fail.

The federal agency said that unlike money stored at traditional banks, funds in these accounts do not carry federal deposit insurance coverage. Most banks are Federal Deposit Insurance Corporation (FDIC) members, which protects up to $250,000 per depositor. 

In cases of bank failures, the federal government ensures depositors access to their funds.