From the American Bankers Association, this is the ABA Banking Journal podcast. Welcome back. Today's episode is presented by Intrafi's Banking with Interest Podcast and I am delighted to be here to talk about a really exciting new. Initiative in the fight against check fraud that we have launched here at the American Bankers Association. And that is the API connection to the treasury check verification System Portal.
And that's, and to talk about that with me, we're gonna do a little bit of a ABA podcast fraud crossover with, your favorite fraud podcast are Paul Benda ABA's, EVP for fraud, for risk management policy, as well as our, my, our ABA colleague Hannah Ierson, who works on all things fraud related and and, and working with, working alongside Paul here at ABA. So Paul and Hannah, welcome to the show.
Thank you, Evan. Thanks for having us.
So so let's get started. I'd love it. Paul, if you could kind of give us a sense, you know, we, we've had this announcement that went out about TCVS earlier today. Listeners can find out more at aba.com/tcvs. Treasury check. Verification systems been up for a long time. What's different about it now and how is ABA helping bankers access it?
Sure. So, yeah, I think most of our bankers that deal with treasury checks know that the TCVS system is out there in the open. It's publicly accessible. You can check treasury checks online and anyone can check them if you know the amount and the treasury check number. So unfortunately, the public system did not check the payee name, and so criminals had figured this out and were counterfeiting. Treasury checks, so they could actually wash 'em or they would reproduce them.
You can see 'em for sale on, on the dark web, on their on telegram channels out there. And they would sell these counterfeit checks that actually passed TCVS verification. So treasury knew they had an issue with it. Treasury checks are challenge for our bankers because the, you know, the one day availability was, you know, requiring them to give over $5,000 to people. So they created the treasury check payee verification system but they restricted access to it.
The only way you can access that system is through an API Direct to Treasury Systems. You had to apply to Treasury to get access to it. They had to give you the keys to it, and it was hard for treasury to roll this out to thousands of banks. There were strong interest from banks. ABA volunteered to be a service provider for banks and provide this as a free service for our members. Treasury to their credit, jumped on it. To give you an idea how quick they responded to our application.
We sent this in, I think it was at around four 30 on a Friday, and we got the approval from Treasury at 7:00 PM that Friday night. Wow. So they were, yeah, they were, they were pretty quick.
They were, they're working after hours over there.
Exactly. Exactly. And so our team, our team got on it. Hannah was my program manager. She's really, the brains behind the whole thing wouldn't have happened without her. And we built the, the, the access to the system through aba.com for all of our members for free. I.
Lemme turn to our, our to the brains behind the new a access portal. Hannah, can you walk through how bankers access this and is there anything they need to know to to get into the system and and make the most of, of this new resource a b is providing.
Yeah, so anyone from an ABA member bank can access the treasury check verification system access point from aba.com./ TCVs, we do check on three things. The first is that they have a bank issued email domain. So if they have. An aba.com account associated to a personal email address, whether that be at Gmail or Yahoo, they will not receive access.
And then the second is we do have multi-factor authentication in the system, so a one-time code will be sent to that bank issued email address to verify the user. Now, these first two steps are really just to confirm that that person is still an active employee at the bank. Then the third is agreed terms and conditions, and they're pretty high level. It's just in alignment with what Treasury has posted. They are on aba.com as well as in the system as well.
Now, I'm curious, is this something that bankers can use, kind of do batch processing of these, of this checking, or is it, is this designed for kinda one-off what individual checks of a potential check?
So at this time we only have single check verification. So when they log in, they enter that specific check, serial symbol and amount, and then they check the box, they click verify, and they get that response for that single check. At this time, we do not have batch processing. It's something we've been looking into but that would be an upgrade in the future if we deemed to go that route.
Okay. No. One thing I am curious about with the system, you know, Paul, can you just speak a little bit to kind of the scale of the treasury checks, checks that are out there? You know, we, we had talked on the podcast a few weeks ago with Steve Kenneally about this new executive order to that that's seeking to really have treasury reduce the number of checks that it both receives and sends out, you know, but still to, you know, that's.
Still months away at the, at the earliest and possibly years, just knowing how these modernization efforts have gone in the past. What is the, what's the scale of the treasury checks that are out there and in terms of creating this potential fraud vector for banks?
Yeah, so I mean this was, this is a question we had, you know, we had embarked upon this process prior to that announcement coming out, which we, we fully applaud treasury for doing. I know Steve. Steve was, definitely thanking them for putting that out.
But when we went on the check fraud panel with the treasury Deputy secretary and Deputy Assistant secretary, Matt Garber you know, I got to talk to him afterwards and said, Hey, for social security benefits, I. It's required to be electronic payment already. So Treasury already made that conversion for social security benefits.
You have to sign up to get electronic payments and he said, yeah, but we've been a little too loose in the exemptions in the past and they were putting out and still continue to put out 600,000 paper checks a month just for social security benefits.
Oh, okay.
So, so yes,. While we are going to move off of paper checks and require them to be electronic payments, we already know we have that process in place. We already know we have vast amounts of paper checks still in the system now. I think, you know, talking with with Matt, you know, treasury is interested in. You know, who has those exceptions? Do they really, you know, need those exceptions or just a desire that they've got?
I think they're gonna be more strict, which ABA fully fully endorses, we think people should, if you're getting regular payments , they should be electronic. It's much safer, it's much faster, it's much cheaper. So hopefully that number will continue to come down. But we know there's gonna be a, there's gonna be a tail for this. So we know treasury checks are, are likely to be around at a significant volume for a while.
Sounds like it's an opportunity for the treasury to talk with some of its payees about the Bank On certified accounts. If people are having a, having, still needing a paper check to be sent out to 'em.
That's exactly right. That's, and that, and they're open to those discussions. They've been great partners for us.
Yeah. I wanna take a quick moment here to thank our sponsor for this month. Banking With Interest Podcast, which features in-depth analysis and insight into the policy changes reshaping the banking industry with insightful interviews and previews of pending policy challenges. The podcast is an essential listen for anyone connected to the financial services industry.
Banking With Interest is hosted by Rob Blackwell, an award-winning former journalist with more than two decades of experience as an expert on financial services policy, he is now the chief Content Officer and head of External Affairs with Intrafi. That's the Intrafi Banking with Interest Podcast. You can learn more at I-N-T-R-A-F-I. That's intra fi.com. And thanks again to the Banking with Interest podcast for sponsoring this podcast.
So, coming back to the conversation on the treasury check verification system access here, Hannah, are you envisioning that banks, you know, will, will check every treasury check that, that, that is presented to them? Or is this something that, you know, where you, where a bank would say, oh, this is. We have a, we, we are skeptical about this particular check and we'll check that. Or is it somewhere in between?
I think it's somewhere in between. So the banks change how it's deployed, really. It's up to them. So some have it managed by a central fraud team and others are deploying this TCVS at the teller level. So it is really up to the banks how they want to do it, but it is gonna be more if they believe it's a suspicious treasury check.
So I'd love, and finally, Paul, I'd love it if you could kind of maybe situate what this announcement, which is obviously something important we're doing in the context of the other things we're doing on the, in the fraud space right now. What's you know, what, where, what, what else is, does ABA have cooking to help banks deal with this the onslaught of check fraud?
Yeah, absolutely. And so I, I do wanna, I do wanna highlight one thing Hannah said before we move on to that is. You know, we, we are excited that the, some of these banks are pivoting to pushing their tellers to get aba.com accounts because we offer such a wealth of frontline training. So we think the more they can be on that website, the more they can be exposed to that, the better off they can learn about a lot of things we're talking about.
Evan, which is, we've got a check fraud toolkit out there. We've got a check fraud frontline training course. For folks to learn about, you know, how are the bad guys executing on this check fraud type of thing. We have our check fraud directory, or our fraud contact directory that includes, you know, over half of all banks in the United States and includes credit unions now. And one of the things that we're really excited about is we're gonna try and make the process of.
Holding funds that are sent fraudulently faster and easier. So we know, you know, we, we actually just went through this last week with a bank. One of their customers was subject to a business name and compromise had sent money to obviously, you know, the criminal who had spoofed. You know, the, the email, the. The bank reached out to the receiving bank but didn't have a good contact, so we wanna try and build more contacts.
The bank didn't know that they should immediately send a hold harmless letter. We wanna try and make sure that we've got a universal hold harmless they can use that will expedite the holding of those funds. And we wanna try and provide a legal and compliant framework around this so that people could agree to, Hey, if I get a request from a bank that's gotta hold harmless, that's done an investigation that's, that's talked with their customer as a customer at a station.
As agreed to these conditions, I will immediately hold the funds related to that transaction while we do a further investigation. And then we mark those on our fraud contact directory with a blue check mark. So you can imagine if you went through the blue, went through the fraud contact directory, you're a blue check mark bank, you see this, this transfer went to another blue check mark Bank, you could reach out and within minutes, hopefully those funds are held.
'cause we know time is of the essence. So this is an effort that we have underway. We're actually engaging outside legal counsel to make sure that we are dotting our i's and crossing our T's, that we can build something that's compliant. And we hope to get this deployed sometime this year. Get this framework out there sometime this year. Because we think it'll have a really material impact on the flow of funds to criminals and save our banks and their customers a lot of money.
Great. Great. Thank you, Paul. That's this is, this is really, this is a really cool product. It's one of, you know it, it's, it's not often that ABA deploys not just a resource or a guide, but an actual, technology product that serves all of our members. And so that's so I know it's a big deal and and your team has done a fantastic job putting this together and creating this, this new resource. And, and, and just as a reminder, it is for ABA members only.
This is something that we, o we that you do have to join ABA if you want to tap into this, correct.
That is correct. So there are vendors out there that offer the service. We know core service providers office, so banks, banks can ask us at other places. But the nice thing about ABA is, you know, we're already an approved vendor for your bank. You have an aba.com login. It's very easy and cheap and it's free. Well, it's, it's free. So and, and if we do hear from banks that want us to support batch processing, that's certainly something we'd entertain.
So if there are banks out there that, that, that would desire that, you know, let us know and we can, we can do cost benefit analysis and see if we can get that deployed as well. Great.
Thank you. Thank you, Hannah. Thank you Paul, for being on the show.
Great. Thanks for having us, Evan.
And you can learn more about the, the treasury check verification system, access at aba.com/tcvs. For our listeners, you can find this in previous episodes at aba.com/banking journal podcast or on any of your favorite podcast apps or platforms. Thanks so much for listening. Go, go, go and subscribe to this podcast. And Paul's ABA Fraudcast, you won't be disappointed. Thanks so much for listening, and we'll be back with you again very soon.