Lack of Collaboration and Communication Hindering Payments Fraud Efforts
- Financial institutions face major hurdles in combating growing payments fraud
- A "perceived legal barrier" makes it difficult for banks to share information
- We are seeing some steps for collaboration
Payments Dive reports that financial institutions are facing a major challenge in combating the growing threat of payments fraud, particularly push-payment scams, business email compromises, and checks.
The article highlights a major issue that contributes to the overall problem:
Part of the problem is that federal and state laws intended to protect customer confidentiality and thwart money-laundering may be interpreted in ways that hamper communication between financial institutions.
This "perceived legal barrier" makes it difficult for banks to share information and work together to identify and stop fraudsters.
Lack of Collaboration and Communication
As noted by Tim Thorson, a senior vice president of payments risk at Regions Bank, during a Nacha panel discussion regarding their plan to implement new rules addressing fraud:
“I wish there was something that we could do amongst ourselves that would amount to something of a safe harbor, where we could talk to each other the way we used to before all the privacy laws came down 25 years ago,” Thorson said. “We’re still paranoid about divulging the information on a mule (account), for instance, on somebody clearly taking money that didn’t belong to them.”
Additionally, the article explains, the industry suffers from a "cultural problem" where banks are often unwilling to communicate with their peers, either due to competitive instincts or outdated contact information.
According to a panelist, "Instead of putting your direct line (in the registry), you put the call-tree-hell (number) because you hope that nobody will sit through it." While we have seen some improvements -- with the ABA, NACHA, and ECCHO all hosting fraud directories to encourage more direct communications between financial institutions -- this still is not enough.
Additionally, this lack of coordination extends to the government level as well.
"There is no federal government office coordinating a response to this multi-billion-dollar crisis, [which] reflects a 'complete and utter failure' of the national government to spearhead a nationwide solution," explained one banking executive. However, efforts are being made today -- with the government proposing a "Payments Fraud Task Force" through the Recognizing and Averting Payments Scams Act, as well as efforts from banking associations such as the America's Credit Unions group, advocating for updates to Regulation CC in order to better combat persistent check fraud risks.
Collaboration Efforts
Luckily, we've already seen some steps toward collaboration, with the ABA, NACHA, and ECCHO all hosting fraud directories to encourage more direct communications between financial institutions.
Also -
- The government has proposed a "Payments Fraud Task Force" through the Recognizing and Averting Payments Scams Act
- Efforts from banking associations, such as the America's Credit Unions group advocating for updates to Regulation CC.
- And, of course, we are seeing the ABA taking a step further by performing a feasibility study into a National Check Verification System.
Collaboration goes beyond just interbank and associations, extending also to fintech vendors like OrboGraph. We've made a concerted effort at various conferences and gatherings to provide FIs up-to-date data on developments and trends, while actively participating in efforts for the feasibility study got a National Check Verification System.
Most importantly, over the past three years we've hosted our very own Check Fraud Roundtable (both virtual and in-person), bringing together FIs and fintechs alike to address and solve the challenges of check fraud. If you are interested in participating, our next in-person Check Fraud Roundtable is scheduled for September 15-17, 2025, in Hilton Mclean Tysons Corner. Click here to learn more.
