As payment apps that mix social media components gain momentum, industry experts are wary that law enforcement will place even more surveillance and policing roles on payment processors.
“One place where regulations might interact with social payment apps is the possible collision of the Bank Secrecy Act and the fourth amendment,” said Jeremy Allaire, co-founder and CEO of Circle Internet Financial, which developed a social payment app after first launching a bitcoin wallet.
The fourth amendment protects U.S. citizens from unreasonable searches and seizures, typically requiring a warrant based on probable cause of a crime.
But payment intermediaries are often asked to take a bigger role in policing how their services are used, to avoid facilitating terrorism and other crimes. When it comes to social payment apps, users often provide more context to why they are sending funds — thus making themselves easier targets for law enforcement if they are implicating themselves in a crime.
Currently, payment providers flag transactions contingent on factors like payment amount or frequency. For instance, providers must send Fincen Suspicious Activity Reports (SARs) for all transactions over $10,000, plus would also have to watch for users structuring payments to avoid triggering a SAR.
Dave Birch, director at Consult Hyperion in the U.K., wonders whether payment providers will be asked to police extended remittance information such as messages, links and/or pictures as well as monitoring transactions. A Venmo transaction with the description "drugs" could be incriminating, or it could be a joke between friends splitting the cost of coffee.
Not only are such messages circumstantial, but Birch said, “It’s not for the payment system to determine what’s good and bad.”
So who’s to judge?
“A judge,” Birch said. “If a law enforcement officer thinks someone is doing something illegal, they arrest them and take them to trial before a judge and jury.”
There are examples of how this kind of payment system weaponization has spiraled out of control, breaking the law.
In the summer of 2015, Sheriff Tom Dart, the chief law enforcement officer in Cook County, Ill., sent a letter to Mastercard and Visa saying he would prosecute if the companies kept processing payments for Backpage.com, a classified ad site the sheriff was going after because it allowed the advertisement of adult services. Mastercard and Visa both cut off Backpage.com, which turned around and sued Dart for infringement of protected speech, winning the case unanimously.
Many companies “aren’t drawing a hard enough line with the government and law enforcement,” said Norm Pattis, a trial and appellate lawyer that founded Pattis Law Firm.
This leads the government to see itself as entitled to the information, which has become politically hairy in the past. In 2012, the federal government pressured payment providers to block transactions to WikiLeaks, the nonprofit known for publishing leaked secrets. In turn, some WikiLeaks supporters turned to the censorship-resistant bitcoin protocol to send donations.
“We require more and more of private entities today and private entities are more and more likely to give in instead of face legal expense,” Pattis said.
Plus, he continued, even consumers will happily excuse government overreach. “In fear, people decide to sacrifice privacy over security an these social media companies are placed in the middle.”
Some technology providers, though, are fighting for restraints.
A number of secure messaging apps have launched over the past year, and WhatsApp (a messaging app owned by Facebook) has also begun encrypting data sent between users. And many tech companies - from Amazon to Apple - have resisted law enforcement efforts to undermine the security and privacy of their devices.
But if police produce a valid warrant, those products become a lot less private.
“In general it seems reasonable with a caveat under due process, if police go to bank or payment provider and say this person has committed a crime and has a warrant, why wouldn’t [the financial services provider] give everything over including the extended remittance information,” Birch said.