Over the past years, crowdfunding has become very common in society through various avenues such as Kickstarter, GoFundMe, and IndieGoGo. The primary objective is to crowd-source funds to help individuals or organizations in various needs such as collecting money to support projects, personal causes or business ventures that (reward-based crowdfunding). Platforms also allow individuals to apply to plead for unsecured loans, which they should pay back with interest (Debt-based crowdfunding) and enable individuals or small organizations to solicit donations for various reasons. Despite the excellent and humanitarian causes, some individuals have taken advantage of the avenue by laundering money through GoFundMe for other illicit purposes.
Individuals receive deposits from GoFundMe or any other crowdfunding site, which is followed by structured cash withdrawals. Cases where cash deposits funded personal bank accounts from unidentified people as well as checks from foreign businesses, have also been noticed. Customers can make payments to GoFundMe and immediately receive electronic deposits from several checking accounts. Wall Street Journal also highlights that another suspicious activity is when a person or business account keeps being funded by a high volume of personal checks and large amounts of payment from such an avenue to a high-risk country . More explicitly, wire transfer activity from an account based in the U.S., owned by a foreign political party, to a foreign state where the account has been funded by deposits from crowd-funding sites such as GoFundMe, out of country cash deposits, online cash transmitter, and personal checks from foreign banks is also suspicious.
The Wall Street Journal suggests that no legislation can protect these sites and payment facilitators from being used to transfer funds for illicit purposes. Therefore, due to the lack of clear rules and regulations that govern GoFundMe, it leaves an opportunity for criminals to transfer money from one end to the other for various reasons. It can be used to fund terrorism, drug traffic, and human traffic or launder money. For example, a drug dealer can receive payments from the various sellers of his commodity by posing as someone who needs help on GoFundMe and directs the people who owe him money to “donate” the money to his good cause, which makes it hard to identify that as an illicit activity.
According to an article published by the Associated Press in early March this year (2019), Camden, N.J., a homeless man, and Katelyn McClure pleaded guilty to money laundering charges. They laundered $400,000 through a campaign on GoFundMe, which claimed to donate to Bobbit Johnny, McClure’s former boyfriend.
Therefore, it is crucial for GoFundMe and the rest of the crowd-funding sites to work with the government to formulate legislation that will be able to curb such vices. That is because people are taking advantage of the lack of regulation in these sites to carry out illegal activities. It is also essential for GoFundMe and the rest of the crowd-funding sites to work with, card networks, financial institutions, and money transmitters to investigate suspicious activities, arrive at the truth and take the necessary actions. That will significantly reduce and even cease the illicit activities carried out via such avenues.
Therefore, it is crucial for GoFundMe and the rest of the crowd-funding sites to work with the government to formulate legislation that will be able to curb such vices. That is because people are taking advantage of the lack of regulation in these sites to carry out illegal activities. It is also essential for GoFundMe and the rest of the crowd-funding sites to work with, card networks, financial institutions, and money transmitters to investigate suspicious activities, arrive at the truth and take the necessary actions. That will significantly reduce and even cease the illicit activities carried out via such avenues.
Discussion Question:
Sources:
- Do you think that crowd-funding sites like GoFundMe should be regulated by the government?
Sources:
- Crowdfunding Sites Like GoFundMe and YouCaring Raise Money—and Concerns. https://www.wsj.com/articles/crowdfunding-sites-like-gofundme-and-youcaring-raise-moneyand-concerns-1456775949
- Woman and Homeless Man in GoFundMe Scheme Plead Guilty to Money Laundering Charges. https://www.apnews.com/54994aca4b6d4748971513dd119672aa
Hi Maddie and Blair!
ReplyDeleteI think this is much more prevalent in today's society than we think! Whether or not it is drugs/sex trafficking/money laundering, but also someone getting into a drunk accident but telling the public on gofundme a different story. However, with all the bad things that happen with gofundme, I think this has helped hundreds of people pay for medical bills or help families when a family member passes away. I feel like if the government could regulate it, it would help diminish these problems but not solve because these criminals will just find another way to do it. This would also be interesting to see if Venmo could be having similar issues or trends.
Maddi, thank you for your response! I agree with you that sites like these have helped a lot of people and they can be used as a good thing. I think that regulation could work if the government could limit it to only let valid accounts participate.
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