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Fraudsters are using peer-to-peer transfer services as a layer to obscure the trail of funds they siphon during account takeover schemes, sources told ACAMS moneylaundering.com.

Venmo, Zelle and other P2Ps, which enable users to send and receive near real-time payments through mobile applications that typically draw from the sender’s bank account and credit the beneficiary’s, handled roughly $300 billion in U.S. transactions last year, a 41 percent jump from 2018, according to research firm eMarketer.

Most P2Ps register as money services businesses and adopt compliance programs, but typically provide few details about their customers to banks on either side of the transaction and have sometimes responded slowly to requests for more information after the transfers have occurred, moneylaundering.com reported in February 2018.

Despite the economic downturn triggered by COVID-19, the top 10 payment apps saw a 38 percent increase in new users during the second quarter of this year, according to analytics firm Apptopia. Venmo, a prominent application owned by PayPal, nearly doubled its weekly transfer limits to $5,000 in April, potentially allowing for a wider range of reasons to send money.

The growth of P2P platforms poses new financial-crime risks, U.S. officials have warned. At an industry event in September, Ken Blanco, director of the Treasury Department’s Financial Crimes Enforcement Network, cited account takeover schemes that used fintech firms as an area of heightened concern for the bureau.

As of September 2019, FinCEN was recording a monthly volume of 5,000 suspicious activity reports, or SARs, flagging potential account takeover schemes worth a combined $350 million, said Blanco, who did not indicate what percentage of those filings involved the suspected use of financial technology-centric firms, or fintechs.

“By using stolen data to create fraudulent accounts on fintech platforms, cybercriminals are able to exploit the platforms’ integration with various financial services to initiate seemingly legitimate financial activity while creating a degree of separation from traditional fraud detection efforts,” Blanco said at the event.

Those concerns have persisted through the first half of 2020, a period marked by the ongoing coronavirus pandemic that erupted in China late last year and hit the U.S. shortly afterwards.

“Most of the advanced fee/non-delivery schemes utilize these [fintech] platforms,” an FBI official said during an online discussion of emerging financial-crime typologies last month. Advanced-fee scams involve attempts to persuade victims to hand over their savings in hopes of receiving lucrative returns.

The use of fintech platforms as part of the layering process—the second stage of money laundering—has drawn the financial services industry’s attention as well.

A compliance officer for a midsized lender on the East Coast told moneylaundering.com that fraudsters have used fintech platforms to transfer proceeds out of a dozen compromised accounts at the same bank, often on the same day.

Criminals will gain unlawful entry into their victims’ accounts through phishing or other means, then use the stolen logins to enroll in a fintech platform and drain the funds by sending them to another user of the same platform—who is often maintaining a money-mule account opened with a false identity, according to the compliance officer. From there the sums can be transferred again or withdrawn at an ATM in less than an hour.

The process has tested the capabilities of anti-money laundering compliance programs that typically view transactions retrospectively rather than as they occur, the compliance officer said.

“I think the fraudsters realize the traditional fraud protections and the ability to reverse transactions is just not there,” the compliance officer said. “Even with that real-time monitoring, when these frauds occur within minutes, it changes the game.”

Money mules have also prompted some large lenders to bring together the leadership of fraud and AML departments or at least set up systems to track each other’s cases, compliance officers told ACAMS moneylaundering.com in March 2019.

Criminals have targeted emerging P2P platforms for years with the expectation that their anti-money laundering compliance programs lack sophistication, said Ben Knieff, a New York-based consultant who works with fintechs.

“It’s a new attack surface for account takeover,” Knieff said, referring to fintech platforms. “I think most banks, at least large FIs [financial institutions], are very familiar with these challenges, [and] AML is becoming more real-time as payments are becoming more real-time.”

Venmo and Zelle did not respond to requests for comment.

Contact Daniel Bethencourt at dbethencourt@acams.org