Zelle is run by Early Warning Services, which is owned by seven of the biggest banks in the US. Launched in 2017, it has proved a huge hit, facilitating $629 billion in transactions in 2022, twice as many as its nearest competitor Venmo.

However, it has also "opened the door to fraud and scams on a tremendous scale," according to a letter from Warren and fellow senators Bob Menendez, Jack Reed, Sherrod Brown and Mark Warner to the Federal Reserve Board, FDIC, National Credit Union Administration and OCC.

Regulators should "closely review and examine the customer reimbursement and anti-money laundering (AML) practices of depository institutions that participate in the Zelle network," says the letter.

Specifically, as the regulators of the seven banks that own Zelle, as well as 1800 depositary institutions that participate in the network, "you have authority to supervise their activities to ensure they comply with key consumer protection and AML laws, including the Electronic Fund Transfer Act (EFTA) and the Bank Secrecy Act (BSA)."

Continue the senators: "We raise these concerns about safe and sound operation of Zelle because depository institutions currently take the position that they are under no obligation under the EFTA to make their customers whole when fraudsters use the network to steal their hard-earned money.

"Instead, depository institutions appear to have forced their customers to foot the bill in the vast majority of these circumstances, often relying on ambiguity over whether a payment is classified as “authorized,” “unauthorized,” or an “error” to avoid reimbursing customers who have been victims of fraud."

In response to the letter, Early Warning Services says: "Early Warning Services is supervised and regularly examined by the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB). In addition, we continually engage with policymakers on issues around protecting consumers from fraud and scams.

"More than 99.9% of Zelle payments have been sent without any report of fraud or scams--a direct result of the robust array of consumer protection measures of the Zelle Network and the more than 1800 financial institution participants on the Zelle Network that partner with us in helping us prevent, detect, and mitigate fraud and scams.

"Lastly, Early Warning operates on the foundation of 30 years of work to reduce risk while continuously evolving and enhancing our fraud and scam countermeasures as criminals find new attack vectors."

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