Preventing Fraud in Banking: A Comprehensive Approach
When a trained employee intervenes in a fraudulent bank transaction, they can stop a scam “before a single dollar leaves the account,” said Jilenne Gunther, national director of an AARP program focused on protecting seniors from fraud.
Bank employees that place a hold on a suspicious transaction or delay the transaction to ask questions stop the scams about half the time, Gunther said, citing research from AARP’s BankSafe Initiative.
Gunther spoke alongside Kris Edwards, Fifth Third’s head of fraud prevention, and Avy Mallik, a partner at Morrison Foerster and former general counsel at the California Department of Financial Protection and Innovation, at a panel hosted by Banking Dive and Payments Dive on Wednesday.
Training and Collaboration
Training on warning signs is ongoing for Fifth Third staff, Edwards said, and the bank maintains mechanisms for its retail staff to share information on fraud and threats up the chain.
While large institutions like Fifth Third often have dedicated fraud intelligence teams, smaller banks and fintechs may not.
But size, Mallick said, is not an excuse when things go wrong – and institutions, no matter the size, need to have a handle on it.
Regulatory Expectations
“Speaking as a former regulator, the regulator will expect you to have the right systems in place to find these red flags and to have the right amount of methodology to understand the typology of fraud and assess what the best course of action is,” he said.
To avoid becoming the weakest link, Mallick said, small banks and fintechs with limited resources should work with well-reputed vendors “that do the work for them, while also making sure that the licensee has the right amount of oversight over the vendor.”
“It’s not an easy task,” he said, but engaging the right partners “can help catch [and] solve problems before they become much larger storms.”
Shared Responsibility
But the legislative onus on scam prevention should not focus solely on banks, Gunther said. “We need to start looking upstream.”
With an average loss of $17,000 per case, she said, citing suspicious activity reports, “we need to bring in these social media companies at the point where [scammers are] first contacting consumers, to look at shared liability.”
Edwards echoed Gunther, adding that’s a focal point of his when discussing the issue with regulators.
“[A] scam does not start with the bank,” he said. “That’s the last piece where money moves.”
