Visa Accused of Loosening AML Checks for Cash App: Whistleblower Allegations Spark Regulatory Concerns

Visa, a key player in global financial services, has found itself under scrutiny following allegations from whistleblowers regarding its handling of anti-money laundering (AML) checks concerning Cash App, a prominent US fintech platform. These accusations were brought to the attention of the Financial Crimes Enforcement Network (FinCEN). The whistleblowers assert that Visa waived its standard AML restrictions for Cash App, potentially exposing the platform to illicit financial activities.

"The two whistleblowers alleged to federal financial crimes watchdog that Visa Inc waived its AML restrictions for the giant US fintech," as reported by NBC News.

The complaints suggest a potential conflict of interest, speculating that Visa's decision to relax AML measures for Cash App may be linked to its substantial investment in Marqeta, a startup heavily involved in processing transactions for Cash App. Visa led a $25 million investment in Marqeta in 2017, raising questions about the motivations behind Visa's actions.

According to a 2020 report from Standard & Poor's Global Market Intelligence, payment processors, banks, and issuers of prepaid debit cards are exposed to significant risks, including criminal activity and regulatory scrutiny, which could tarnish their reputations and lead to legal complications.

Cash App, owned by Block, has emerged as a major revenue driver, contributing 65% of Block's net revenue during the first nine months of 2023. With 55 million active users and substantial inflows totaling $239 billion over four quarters, Cash App has become a significant player in the fintech industry, despite lingering concerns about regulatory compliance.

"The fintech produced $2.9 billion in gross profit for Block during the first 9 months of 2023, up 37% year over year," according to regulatory filings.

Marqeta, a California-based digital payment technology company, went public in 2021. Block is Marqeta's largest customer, accounting for 72% of Marqeta's net revenue in the first nine months of 2023, as disclosed in regulatory filings.

The whistleblowers' allegations, spanning from 2016 to 2022, paint a troubling picture of a financial system operating outside regulatory oversight. They describe lax due diligence practices within Cash App, facilitated by partnerships with various financial institutions, including Lincoln Savings Bank and Sutton Bank.

"The siloed structure of the Cash App machine, the whistleblowers say, 'misdirects the attention of regulators,'" according to an NBC News investigation.

Lincoln Savings Bank's involvement in handling Cash App deposits since 2016 raises concerns about the adequacy of its vetting procedures. The whistleblowers allege that Lincoln Savings Bank's minimal due diligence failed to comply with banking regulations, suggesting a prioritization of profit over regulatory compliance.

In response to these allegations, Cash App declined to comment directly but emphasized its commitment to regulatory compliance and collaboration with law enforcement agencies to combat illicit activities. Visa and Lincoln Savings Bank also refrained from addressing the whistleblowers' claims directly.

"We're an issuer to the card product to spend funds that you have with Block in your Cash App account, but that's it," said Mark T. Dabertin, Sutton's general counsel and chief compliance officer.

The whistleblowers' revelations underscore the importance of robust AML measures and regulatory oversight within the fintech industry. As Cash App continues to grow in popularity and usage, addressing these concerns becomes imperative to maintain trust and integrity within the financial ecosystem.

By fLEXI tEAM