For years, the payments industry has avoided directly addressing the problem that it unintentionally yet frequently funds hate groups and harmful individuals. That all came to the forefront on January 6, 2021, when insurrectionists stormed the U.S. Capitol. Companies like PayPal, Square, and Stripe quickly shut down payments processing for smaller organizations connected to the insurrectionists, but it was not enough. The use of various platforms, from offsite retail sites to crowd-funding and content subscription sites, is becoming more prevalent and harder to control. While that’s happening, the country is seeing a surge of white nationalist groups, with 55% growth between 2017 and 2019.
According to a recent study from Global Disinformation Index (GDI) and the Institute for Strategic Dialogue (ISD) on how hate groups get funded, hate groups are financed by various platforms – not only payment processors but facilitators as well. As Lecia Brooks, Executive Director of the Southern Poverty Law Center, recently testified in front of Congress, extremists in America exploit these internet platforms to engage in and fund hate without being “card-carrying members” of extremist groups. Because of this, individuals are getting the funds they need to engage in potentially dangerous acts. As part of her testimony, /Brooks recommended that payment processors and facilitators undergo regular audits to accurately assess how and to what extent their platforms are being used to fund hate.
I propose a different solution to this growing problem. The industry must go further than individual companies attempting to fight this insidious problem in isolation. Instead, as our industry booms, we must organize and collaborate to create clear and thorough guidelines so that individuals and organizations who perpetuate hate are stopped.
Lack of Oversight
Unlike other countries, the United States and its financial institutions do not have a standard definition for what constitutes “hate and harm” that everyone can look to for guidance. The same goes for many platforms, which exposes every company to greater potential abuse of their services. Individual companies coming up with their own definitions and remedies sows confusion and encourages bad actors to take advantage. However, that’s the status of the industry for now.
Some crowdfunding sites are known to be used by groups or individuals engaging in extremist activities. For companies that do have established guidelines around what constitutes a hateful organization, people and groups that perpetuate hate frequently find ways around the rules. For instance, they often change their organization’s name slightly to remain undetected or shop around to different processors until they find one with less strict rules.
These factors, coupled with the lack of federal oversight monitoring how much money is going to which groups and how they’re getting their money, leads to continued hateful actions. The lack of oversight allows some companies to be more permissive in their guidelines so they can profit from these groups, all while flying under the radar. While this makes it harder to track hate, it makes it all that more important to understand who uses your services.
Taking “Knowing Your Customers” to the Next Level
The topic is already a hot-button issue in investments and payments with some clear guidelines, but Know Your Customer (KYC) doesn’t go far enough. As it stands, KYC only covers two areas: anti-money laundering (AML) and known terrorist groups, but the guidelines don’t explicitly define hate and harm. The result is multiple loopholes where some companies don’t proactively seek out perpetrators of hate without facing consequences. As we’ve seen since Charlottesville in 2017, it’s more important than ever for payments companies – and payment facilitators – to know who is using their services.
There’s talk of the government stepping in and setting up guidelines and regulations for how to stop payment processing organizations and individuals who engage in hate and harm. However, I would argue that the industry should act before the government feels compelled to. While we’ve seen government oversight on various financial topics like the Dodd-Frank bill and payments protection laws, the payments industry is perfectly capable of self-regulation in this area. Often, the Congressional and oversight bodies forming policies are not experts in the payment industries and therefore, may go too far in regulations or have rules that aren’t appropriate.
What the Payments Industry Can Do Right Now
Instead of waiting for the government to step in or individual organizations responding reactively, we can act right now. I agree with the ISD and GDI conclusion that the leading industry bodies such as the Electronic Transactions Association (ETA) along with NGOs and Academia should join forces to develop regulations. The two entities should start a task force to determine how to approach this problem now, so the industry can have a proactive approach to the problems we’re facing. Industry-developed regulations that are universal will protect individual processors and facilitators from potential lawsuits or backlash.
In addition to industry bodies and a task force, the payments industry must consult with experts on hate and domestic terrorism to properly develop policies and technology that siphon off funding of hate groups. Although the payments industry is hesitant to define hate itself, respected institutions like the Southern Poverty Law Center (SPLC) and Color of Change have definitions that they encourage the industry to adopt. The Southern Poverty Law Center’s definition is one that many experts point to as a good basis. They define a hate group as “an organization or collection of individuals that – based on its official statements or principles, the statements of its leaders, or its activities – has beliefs or practices that attack or malign an entire class of people, typically for their immutable characteristics. An organization does not need to have engaged in criminal conduct or have followed their speech with actual unlawful action to be labeled a hate group.”
Our industry has an enormous amount of privilege and power, which is unfortunately used to harm or suppress the rights of marginalized groups. To successfully stop these groups, the payments industry must work together and with organizations to identify clear parameters of what constitutes hate and harm. Once these parameters are in place, payment facilitators and processors must install safeguards that weed these potential violators out of their system and proactively monitor who’s using the platforms. It’s our duty to our fellow citizens to develop processes for stopping the funding of hate and harm to do our part to prevent domestic terrorism and the perpetuation of hate and harm. I believe if the industry works together to create industry-wide standards, we will combat hate while reducing potential government overreach.