Intensifying Scams Call for Innovative Solutions
Scams pose a considerable threat to both American families and global financial institutions. With advancing methods, professional gangs are relentlessly targeting consumers, stealing upwards of $100 billion annually. This criminal activity inflicts significant emotional and financial damage on American families. Furthermore, with the emergence of new technology like AI and deepfakes, scammers are finding increasingly sophisticated ways of duping victims.
Dual Approval: A Potential Solution
One of the key reasons scams are challenging to stop is because they manipulate the victim into transferring their own money. Even when financial institutions flag suspicious activity or try to block transactions, a determined victim can often bypass these warnings. To address this, financial institutions could consider expanding a control mechanism they have used for decades: dual approval.
Dual approval means that two authorized users must approve a proposed action. This has long been a practice in commercial banking, where businesses designate one set of users to initiate transactions (“makers”) and another set to review them (“checkers”). This significantly reduces the risk of losses due to internal fraud, scams, and errors.
Expanding Dual Approval to Retail Customers
While dual approval is common in commercial banking, it is generally not available to retail customers. However, expanding this service to retail customers could potentially prevent many scams. By requiring two approvals instead of one, it becomes tougher for scammers to isolate and trick victims. Also, schemes that rely on stolen account credentials would become more difficult, as it’s harder to steal two sets of credentials than one.
One way to implement this would be to make dual approval an optional setting for customers. For instance, an aging parent managing their finances could designate a spouse or child as a “checker” on their accounts. This checker would have to approve transactions exceeding certain thresholds set by the customer, reducing the risk of scams.
Another approach could be to involve an independent company to provide scam protection to retail customers. This third party, expert in spotting scams, could review transactions exceeding customer-set thresholds. This could offer an added layer of protection without involving family members.
The Challenges and Benefits of Dual Approval
While implementing dual approval for retail customers could introduce some friction and delay, the overall benefits outweigh the potential downsides. The key lies in the customer deciding when this friction comes into play. Paying a mortgage should not require a second approval, but wiring a large sum to a new payee should prompt a pause.
Financial institutions also stand to benefit from offering dual approval controls to retail customers. By reducing the risk of loss and broadening responsibility when a loss occurs, dual approval serves as a significant safeguard against scams.
The Path Forward
While dual approval presents a promising solution, it won’t completely eliminate the risk of scams. A comprehensive approach involving both governmental and private sector actions is necessary. The Aspen Institute’s National Task Force on Fraud and Scam Prevention proposed a comprehensive national strategy to address this problem. Their recommendations should be aggressively pursued, alongside the expanded use of dual approval.
As scammers continue to evolve their tactics, it’s crucial that financial institutions stay one step ahead. Offering dual approval to retail customers could be a significant step in the right direction, providing an additional layer of protection and helping to prevent the devastating impact of scams.
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