As a former Special Agent for the Federal Bureau of Investigation (FBI) specializing in the investigation of financial crimes, it is easy for me to see through the agenda of some politicians who are attacking digital payment companies — such as PayPal, Zelle, and Venmo — for the increased number of online fraud cases today.
Blaming payment processors for fraud is like blaming forks and spoons for obesity. It does not make any sense.
The real reason for the increase in online fraud cases today is that members of Congress have continuously refused to provide the FBI and federal regulators with the funding they need to police and catch the perpetrators.
The members of Congress who are to blame know this, but they continue to scapegoat new payment technologies for the rise in crime, proposing punitive regulations against them.
Take, for example, Sen. Elizabeth Warren (D-MA), who claims that these digital companies pose “a broader threat to the stability of our banking system” and has introduced legislation designed to regulate them into oblivion.
While proposing regulations against digital payment companies might allow Warren and other lawmakers to state in their press releases and campaign trail speeches that they are doing something to address this public safety crisis on fraud scams, that “something” is the wrong thing.
Under current law, a financial institution must reimburse the consumer if a scammer accesses their account and steals their funds. However, if the consumer gets duped into sending the fraudster money voluntarily, that responsibility falls on them.
This is common sense. If a car mechanic asks for money to fix my car, and I withdraw cash and pay them, the bank shouldn’t be responsible if the transaction goes south. However, legislation spearheaded by Sen. Elizabeth Warren (D-MA) seeks to shift more liability onto payment platforms like PayPal, Zelle, and Venmo, regardless of the transactions’ details. Because of how many transactions these companies process annually (over $1.52 trillion from PayPal, and $44 billion from Zelle, for example), it’s fair to assume that her legislation passing would lead to these companies’ bankruptcy.
Warren’s bill wouldn’t reduce crime. It would just cause scammers to shift to using the other tools in their toolbox, such as check and wire fraud as well as gift card scams.
Gift cards are especially a problem. On a daily basis, I hear from individuals and businesses who were victimized by a scammer to send gift cards as a form of payment for bail, taxes, attorney fees, and accidents, despite the gift card authorizing companies explicitly stating that they should be used for gifts only.
Fraud happens everywhere, not just on the platforms of upstart online payment processors. It’s ridiculous and cowardly to blame the new kid on the block and pretend that the fraud issue is so simple and one-dimensional.
The real solution is to educate the American people about the prevalence of these fraud schemes and provide federal law enforcement and federal regulators with the tools and budget they need to properly pursue these scammers. To date, members of Congress have failed on both counts.
The FBI recognizes this reality. In August, the agency announced the launch of a nationwide effort to raise awareness of frauds and scams impacting the public and encourage increased public reporting to law enforcement. However, the agency has told Congress repeatedly that it won’t be able to adequately fend off these digital scammers if the legislative branch doesn’t adjust its budget.
Last year, Congress proposed significant cuts to the FBI’s budget, depriving investigators and analysts of the necessary resources to crack down on this epidemic. In 2024, the legislative branch ultimately cut the FBI’s budget by $47 million, and it is now considering another $188 million reduction.
While fiscal responsibility is essential, making it more difficult for the FBI to fight online scams will only invite more of them.
Worse is that the scammers are aware of how Congress’ budget cuts make the FBI tracking them down, prosecuting them, and punishing them akin to finding a needle in a haystack, which only incentivizes the scammers in question to double down on their lawless activities.
As an adjunct forensic accounting at three prominent universities in Massachusetts, I have never suggested to my students that organizations like PayPal, Zelle, and Venmo are at the root or cause of fraud. Instead, I educate them on the types of fraud schemes out there and what they should do as future federal law enforcement and regulators to properly pursue these scammers.
Congress should start doing the same. It needs to stop playing politics with the FBI, law enforcement, and regulators’ budgets and instead give these professionals the tools they need to find, punish, discourage, and prevent these criminal gangs from continuing to mislead the American people.
There are no regulatory shortcuts to protecting the public safety I feel that I speak for all FBI and law enforcement veterans when I say this is the only sustainable path forward.
