“Every company is becoming a tech company. We have this thesis that every company needs to be a financial services company, too.”

William Hockey, Founder of Plaid

The banking sector, like many other industries, is experiencing big disruption. The technological giants like Apple, Facebook, Amazon et. al are trying to make payments easier, through their platforms. All of the payments processed through platforms like Apple, Facebook, Amazon, occur electronically. It can be argued that they are easier to track and that this could reduce money laundering activities. 

On the other hand, the technology companies have a massive burden managing all the compliance requirements, which vary by country. Many major financial institutions have large compliance departments to verify customers’ identities and send suspicious transactions to relevant authorities like The Financial Transactions and Reports Analysis Centre of Canada (FinTrac) or the Financial Crimes Enforcement Network in the United States (FinCEN).

For example, the Apple Pay service, merely facilitates payment between vendors and users, according to Apple [1]. Therefore, Apple does not have to register itself with FinCEN and does not have to follow the strict compliance rules. The stricter compliance helps companies detect a fraudulent transaction at an early stage and notify the relevant agencies before the money is laundered. An example of loose compliance law within a tech firm can be demonstrated by a recent headline that showed that money launderers have found a way of using Amazon to launder their illicit funds. The money launderers stole some authors’ identities and then listed a new title for an inflated price [2]. This transaction could have been prevented if Amazon realizes that they are now vulnerable to money launderers and needs to implement now innovative compliance techniques to prevent being a conduit to criminal activities. 

As money launderers use new technology to clean their dirty money, the technology companies have to find better ways to prevent it. If the technology creates a problem, it may also create a solution but the companies have to be proactive before it’s too late.

Apple, Facebook, WeChat, Amazon, WhatsApp — Technologies Branching into Money Transfer

WeChat, a Chinese messaging app, has a payment service in which over 1 billion users make or receive payments. According to Hillhouse Capital, mobile payment volume in China in 2016 was approximately $5 trillion dollars [3]. WhatsApp has started testing its digital payment tech in India, similar to WeChat in China [4]. What is surprising is that all these companies started with a simple messaging service but slowly they have built an ecosystem that is large enough to threaten traditional banking. In addition to offering a payment system, these tech companies are offering convenience like fingerprint or face authentication [5].

One of the major compliance issues for tech companies branching into digital payments is that, while verifying customer data, there is no face-to-face interaction [6]. This increases the chances of money laundering or terrorist financing. For example, criminals exploited AirBnB by renting out space to fake guests so as to clean their dirty money [7]. 

As Iron Sharpens Iron, so New Technologies Are Needed to Prevent Money Laundering

In order to fight money laundering in the digital age, the tech companies need to create new detection methods. Criminals are using Uber to launder funds. The money launderers employ Uber drivers who accept ride requests. After paying Uber its normal cut, they distribute the funds back to the person who paid for the rides, laundering the funds [9]. 

Airbnb, with millions of bookings being conducted through its portal, has to use new technology to prevent criminals from exploiting its service. Airbnb stated it is using machine learning and predictive analysis to identify suspicious activities [7]. This is the right approach. The companies have to use the power of artificial intelligence and machine learning to analyze the transactions in real-time and report suspicious activities to FinCEN [8]. Uber should follow suit. It should create a strict compliance regime to monitor money laundering. A regular activity monitoring system would verify the legitimacy of the activity and reduce the frequency with which the companies are unwittingly exploited as conduits to criminal activities.


[1] https://searchcompliance.techtarget.com/blog/IT-Compliance-Advisor/Apple-Pay-sidesteps-compliance-rules-FCC-takes-first-privacy-action

[2] http://fortune.com/2018/02/22/money-laundering-books-amazon/

[3] https://www.cnbc.com/2017/10/08/china-is-living-the-future-of-mobile-pay-right-now.html

[4] https://economictimes.indiatimes.com/magazines/panache/heres-your-easy-guide-to-making-payments-using-whatsapp-pay/articleshow/62934145.cms

[5] https://www.mobilepaymentstoday.com/articles/the-new-payment-future-3-technologies-leading-the-way/

[6] http://www.fatf-gafi.org/media/fatf/documents/reports/ML%20using%20New%20Payment%20Methods.pdf

[7] https://nypost.com/2017/11/27/criminals-are-reportedly-using-airbnb-to-launder-money/

[8] https://www.theneweconomy.com/business/money-laundering-in-a-digital-world

[9] https://thenextweb.com/contributors/2018/03/18/uber-ghost-rides-linked-online-money-laundering/