From the American Bankers Association, This is the ABA Banking Journal podcast. Welcome back. I'm Evan Sparks. Today's episode is presented by Alkami. Fraud is obviously top of mind for banks, in particular check fraud, which has s kyrocketed in recent years despite the decline of checks as a payment vehicle you know, I think we When you look at financial crimes enforcement network data in 2022, suspicious activity reports had shot up to shot up by more than 700 percent in less than a decade.
So accounting for less than 9 percent of payments, but nearly two thirds of the volume of payment fraud. And that is a big problem for banks of all sizes and something that I might, that my colleagues here at ABA are hard at work on.
Trying to figure out ways to to ensure that we can help banks navigate the challenges of Of all kinds of fraud and fraud and check fraud in particular So here to talk with me today is our expert on all things fraud and cyber related Paul Benda executive vice president , as well as my colleague and my boss ABA chief communications officer, Peter Cook. So my name's not Mary, but we've got Peter and Paul here. So thanks for being on the show.
Thanks for having me. And Evan, I like to, I like to call Paul our fraud guru.
Fraud guru. There we go. So so let me, so bring us up to the mountaintop with, With us a little bit, Paul, can you before I talk a little bit about some of the the things ABA has been doing in this space, can you kind of give, give us a, the lay of the land here at the midpoint, you know, we're going back to school end of summer here at here in 2024, what's the state of play for fraud that America's banks are dealing with this right now?
Yeah, I mean, I think there's two key, two key places we're seeing fraud really rear its head. One is, as you said, check fraud. We know this is still a big challenge that's out there. I mean, checks are an inherently insecure form of payment, and the criminals have figured out that it's, you know, they can pay off postal employees, they can rob postal employees, they can get access to these checks from folks, and they've figured out how to counterfeit them, and how to reproduce them.
And then deposit them. And so that's, it's turned into a very lucrative crime for them. I'd say it's a, it's, there's a lot of criminal syndicates out there that are, you know, doing this on an industrial scale, this isn't necessarily being done by just small time folks. And so we're, we're feeling that our industry is feeling that on the other side, we're seeing, you know, rise in impersonation driven scams.
And so this covers a whole bunch of things, whether it's using a spoofed caller ID or a spoofed tax or a spoof social media account they're really going after customers. And trying to convince them to send money to criminals. So, I mean, it's, it's a big challenge for us.
It's one thing that we're, we're fighting really hard to try and, you know, hold the telecoms accountable so that they, the criminals can't do this, but you're seeing the rise in the crypto investment scams where social media accounts are being compromised or being impersonated and convincing people are seen in a grandmother's games where they're impersonating kids and, you know, convincing grandmothers to send money out cause their kids going to jail.
And, and our fear is that as artificial intelligence becomes more accessible, That these types of impersonation scams are going to become more sophisticated and simply increase.
All right. Well, I want to come back to some of the technological side of these, the impersonation scams in just a minute. But, you know, first you talked about you know, talking about check fraud. We've talked on the show before about ABA's check fraud warranty breach claim directory. And that was just this summer upgraded a big tech upgrade in terms of its user friendliness, but also an upgrade in terms of its capacity and its scale.
Can you talk a little bit about the, the newly redesigned fraud contact directory and what, how banks can use it?
Yeah, absolutely. So, so, you know, when we launched that check fraud directory, it was a little bit of a shoestring budget. Want to get something out there quick, be responsive, you know, have a tool for our bankers, you know, it's not a silver bullet, right? It's a, it's a, but hopefully it gets rid of one pain point. So you know, where to file these claims when they come in.
And the one thing I will say is that the large banks, you know, they have their challenges, but they did embrace the directory. They, they made their information available. Several large banks have put up what, what is required to file a claim that's on there. And so we appreciate that. And, and the directory now is almost 2000 banks on there. And what I find is really interesting is we make this available to members and non members and over a quarter of the participants are non members of ABA.
So we're providing this free service, you know, for the banking industry, because we know this is a big challenge that they're facing out there. With the success of that, you know, we saw there was a need for, you know, people to be able to access other banks. And so we expanded it to the fraud contact directory. So including ACH wires, TCH, real time payments, FedNow contacts. And we know there's other organizations, other places you can get those contacts.
But we thought it'd be helpful to put it in one single spot. And the goal here really is for those time sensitive needs, we're hoping to grow it to be a real resource. When say a client experiences a business email compromise and they send the money to the wrong place, they reported to the bank, the bank then can reach out really quickly to the receiving bank and hopefully hold those funds and go through the process of recovering those funds for their, for their client.
And so that's kind of our overall end state goal for this. We're really trying to build a framework that institutionalizes that for banks so that people who participate will get the responses they're hoping to get in terms of holding those funds. And we just want to make that connectivity between bank to bank easier. You know, we're not focused on ABA members.
We're focused on the industry as a whole because, you know, fraud is such an important problem out there and we're doing everything we can to try and, you know, help mitigate that.
Speaking of the expanded, expanded nature of this fraud contract directory, I, I saw an email recently from a banker saying he, a community banker in the South, who was able to quickly identify a contact person at one of our largest nationwide banks and, and recover 71, 000 for a customer who been induced to send a fraudulent wire. I mean, can you talk a little bit about the impact that community banks in particular are seeing from having these contacts at the largest banks?
Yeah, I mean that I, you know, we're really excited about that and we hope to increase that by, you know, a hundred fold when that happens and, and, you know, so a lot of times if, if it's a fraudulently induced payment, you know, the, the customer is, is liable, right. Cause they authorize that, but we don't, we know there are times when the, they might file a Reg E claim and that bank would be on the hook for that money.
So not only can the service potentially, you know, save your, your client's money, but But it also could save the bank's money. And so, you know, the, the criminals do a great job of communicating with each other, leveraging their, you know, their tactics, techniques, and procedures, you know, and we as an industry need to do a much better job of sharing information quickly so that we can react faster and stop these guys from getting this money.
What are, what are banks doing to deploy additional technology that can help tackle some of these challenges without, you know, significantly increasing the staffing that's required to process and, and deal with concerns about fraud.
Well, you know, I think one of the things that we're really excited about is that ABA is, is embarked on an initiative to gather input from multiple vendors focused on this check fraud space. We'll be issuing an auto report that kind of, kind of a consumer reports of, of different technologies that banks could look at. You know, we're not going Endorsing one necessarily, but providing people you know, information so they can make those decisions.
We think that's gonna be really helpful for banks. The other thing is, unfortunately, in some ways, it does take staff. You know, what we're seeing is a lot of counterfeit checks and counterfeit checks, unfortunately, have a midnight deadline. So you gotta, as soon as those checks come to the bank, banks need to review those. And in a lot of ways, because of the mobile deposit nature of things, it's it's it takes a person looking at that, that sometimes those automated tools don't work as well.
So looking at that is key. The other fear, though, is as we move towards. The, you know, the digital deep fake areas we're starting to see the criminals actually trying to fake customer voices and calling into two call centers. We've actually heard from one of the vendors that works in the space that's operational with banks, a 400 percent increase in the amount of deep fake calls that they're seeing in those call centers.
And so we know there's vendors out there that are able to detect those falsified voices. And so that will help, I think, as that threat rises, because I think we're just seeing the tip of that, how that's gonna be used by the criminals. You know, they are very innovative, and so I'm sure we're gonna start seeing more and more of that. And so there are some technologies out there that could help with that.
Thanks so much, Paul. You know, Peter, we've got Banks Never Asked That coming back, I believe, for our fourth year. And then, and we have a new campaign that's going alongside that. Can you talk a little bit about what we're doing? You know, I mean, because obviously this is the whole premise of this Banks Never Asked That campaign has been People are trying to impersonate your bank. We are not, your bank will never do anything like this. And it's been incredibly successful.
Can you talk a little bit about what we're doing that's new this year and how we're building on that campaign?
Absolutely, Evan. And and we're, we're very proud of the Banks Never Asked That campaign. It launched in 2020. At the urging of, of members across ABA who were looking for more resources to help educate their, their customers about the phishing threat and how to protect themselves from the phishing threat. And we decided that there had been a number of efforts to try and do this, all laudable efforts and we need to try and do it a little bit differently.
Use humor to try and engage customers and the public and to try and educate the the public and and to cut through the noise And we thought if we did it a little edgier with humor bright colors and again shocking and and surprising questions again Your bank will never ask Then maybe the message would start to sink in and what we've found Is that it has made a difference we've had strong engagement from the public with the banks never ask that. com website.
We've had attorneys general in a number of states See this campaign as a real consumer protection, consumer education vehicle, and encourage people to, to go there. And and most importantly, we've had banks of all sizes across the country, close to 2, 500 banks participate in Banks Never Asked That since it launched. Launched in 2020. And every time we try and move on to a new campaign, we hear from banks saying, please don't this is working, this is helping.
And so we are bringing back again, launching in October on October 1st with some new wrinkles this year. We're going to update the quiz that allows consumers to try and spot scams on their own and see how well they'll do. And a number of new pieces of content, social media content, some videos that we think will be engaging and entertaining. And, again, cut through the noise. And perhaps the most important new wrinkle in the campaign, Evan, is really a sister campaign to Banks Never Ask That.
We've heard, as Paul has from our members, that check fraud has really been rampant. It is causing real pain for customers and for banks. And is there, was there anything that ABA could do to help educate consumers about the risks of check fraud and and, and how to write checks safely? We know that there's still going to be people I happen to be with my 95 year old father at the moment, and my 95 year old father is not gonna give up his checkbook anytime soon.
People are gonna continue to write checks. Businesses are gonna continue to write checks. And if that's the case, We need to educate them on how to do so safely as safely as possible. Use digital online tools as often as possible. But if you have to write a check, here's some tips on how to do it. And that's what practice safe checks is all about. That's the name of this new campaign.
And it provides real world instruction and tips on, on how to complete your check safely and how to get that check safely to the. The person to the to the bank and to the person who is set to receive that check, whether it's using the Postal Service safely and and cautiously. And so that's the goal of practice safe checks. We're really excited about this new campaign. It is edgy and funny.
And again, We hope most importantly educational and we've had great feedback already from banks around the country Eager to participate not just in banks never ask that but also practice safe checks both campaigns Evan I would note open to aba members and non members and all the resources we provide here social media videos posters digital signage all of that. We're providing free of charge to every bank in the country that wants to participate
Yeah, absolutely. That's fantastic. ABA. com slash banks never ask that. I'm going to take a quick moment here to thank our sponsor for this episode. This episode is presented by Alkami. Your account holders deserve the best. Alkami is empowering financial institutions with a single platform for marketing, retail, and commercial banking solutions. Accelerate your growth with financial services, full funnel marketing, data insights, and predictive AI with digital banking. Visit Alkami.
com to learn more. That's A L K A M I dot com to learn more. And thanks again to Alkami for sponsoring this episode. Peter, you touched on some of the, the things that we, you know, messages around law enforcement. Paul, I know you taught, you talked a little bit about our partnership with the postal inspection service.
Can you Paul, can you speak a little more to how ABA is working with law enforcement on tackling fraud issues and making sure that it's it's top of mind for our partners in the law enforcement community?
Yeah, I mean, I think one of the things that we're, we're trying to figure out is how can we work more closely, like you said, with the U. S. Postal Inspection Service to have a formal memorandum of understanding to try and do an education campaign around being able to Right. And execute checks and mail them as safely as possible. You know, we know that is a big vector for them to receive that.
They're open to when we get reports from our members of where our checks are being stolen from, you know, they, they use those as leads especially when cause they know that sometimes even their own facilities get infiltrated. And so these tips that we provide them help them identify some of those bad apples that have gotten in there and try and shut down those rings. So I think that's one of the big things is, you know, being able to respond and act on some of the tips that we give them.
And then we're trying to figure out, are there ways that we can increase prosecutions? You know, it's a big challenge for us, quite honestly. You know, the federal officials generally don't get involved unless it's high dollar amounts. We think Texas has a great model that they've implemented in the past couple years. The Financial Crimes Intelligence Center. Which is basically a SWAT team for financial crimes, and they're using that to go after different things.
Check fraud being one, empowering the locals with the knowledges and procedures to go after that. So we're gonna try and see how can we leverage some of the lessons they've learned for other states to try and bring the locals into this fight because this, this problem is so widespread, we need everyone pulling their weight.
You know, one of the things that we, one of the things that I've seen a few people saying on social media recently is, Oh, you know. large banks don't help small banks with this check fraud stuff. ABA is not doing anything. And I look at what we're, what, between the fraud contract directory, the law enforcement partnerships, the, you know, safe checks campaign, banks never asked that, the massive investments we're making in all of these areas.
What's the, you know, what is your take on the, on the idea that large banks aren't working with small banks to deal with these fraud issues?
Well, you know, I can understand the frustration, you know, you know, if you look at some of the large banks and the volume of claims that they get it can be upwards of tens of thousands a month. And I'm, I'm sure that some of those slip through the cracks and I'm sure some people disagree with the decisions they make and there's a lot of money at stake. So I can see why, why those small banks would be frustrated. I will tell you that.
The, the teams that we work with are, have been really responsive to us. They, they want to work with us. They want to improve their processes. You know one of the largest banks is actually figuring out a way where they can actually return funds faster to smaller banks. I know some small bank members would be shocked to hear that.
But it is a new policy that they're putting in place so they don't have to wait for an indemnification agreement to send money back when they believe fraud has occurred. So, you know, they know there's room for improvement. We know that sometimes these claims takes too long but I will tell you that, that when we bring an issue to them, they do, they do internalize that, they do make some changes, they do make some improvements that we have seen.
Notarization requirement for claims to try and make it easier for small banks to, to process these claims. Not necessarily all of them, but it's a gradual process that at least they're willing to work with us. And I, I think that's the strength that ABA brings to the table is that we can raise the issues that small banks have to banks of all sizes and try and come up with a, with a solution that, that solves industry.
And remember, we got to put the focus on the criminals that are the ones that are actually doing this. So I think we have to figure out, you know, how do we optimize the process internally, but we, at the same time, We need to be focused on the bad guys that are profiting from this and focus on how do we stop this or at least minimize it going forward.
Yeah.
And Evan, if, if I could just, just to chime in, if there is any one thing that should unify this industry on a, on a shared goal, it should be reducing fraud and protecting customers. I hear consistently all my conversations with banks across the country. We all know that. the challenge out there, the threat that's out there, the very real threat and the harm that these bad actors are causing. And nobody in the industry wants to let them get away with it.
And this is an opportunity, whether it's participating in the fraud directory and so many of the great initiatives Paul and his team put together or participating in our banks never asked that or practice safe checks campaign. We have banks of all sizes participating because they see the shared strength of the industry working together, the more banks that participate, the greater the likelihood is that consumers and customers are educated. And this reduces the problem.
And the sense I get is that people are motivated to do that. Banks are motivated to do that. And this should be something that at every bank in the country should be striving for.
Peter, Paul, thank you so much for being on the show. And for our bankers, you can find this and these resources at ABA. com, the fraud contact directory is at ABA. com slash checkfraud directory. Join nearly 2, 000 banks if you haven't already signed up and get access to fraud, direct fraud contacts and tech and and required submission formats at ABA. com. At banks across the country banks of all sizes including all of the nation's largest financial institutions As well and then also go to aba.
com slash banks. Never ask that to get more information about Banks, never ask that campaign and the safe checks campaign coming out in that are going to be launched in october go to go there now and you can get get early access and figure out how you're going to implement these campaigns and Use them with your customers and as as a part of your educational efforts in october. So thank you both
Thanks, Evan. Great. Thank you.
For our listeners, you can find this and previous episodes at aba. com slash banking journal podcast. And you can also find us on any of your favorite podcast platforms. Thanks for listening. And Thanks again to Alkami for sponsoring this episode. we'll be back with you again very soon.