Payments Dive Trendline on Payments industry seeks to keep pace with fraudsters

Financial institutions need federal rule changes – and coordination with other industries – to attack online fraud more comprehensively, fraud-fighting professionals said Wednesday in an online panel discussion.

In other nations, a cross-sector approach has delivered “some good lessons learned,” said Donna Turner, a consultant with Risk Insight Solutions and former chief operating officer for Early Warning Services, the bank-owned parent of Zelle and Paze. “We got to get there through a cross-sector approach to this, which we’ve seen in other geographies.”

Turner and other panelists spoke Wednesday during a virtual event focused on how the battle against fraud has changed with artificial intelligence, Attacking Fraud in the AI Age, which was hosted jointly by Payments Dive and Banking Dive. 

Combining anti-fraud efforts across banks, telecommunications and social media companies could prove effective as fraud actors continue innovating with new AI-enabled tools, said Paul Benda, executive vice president of risk, fraud and cybersecurity for the American Bankers Association.

“If we really want to prevent this, we have to get the signals from the telecoms, from the social media companies, into the banks,” Benda said. “We have to share the account data back and forth so that we can trace this down to the end, and then we can stop sending funds to those accounts that we know are actively being used for fraud.”

Mark Kwapiszeski, executive chief information officer at PNC Bank, and David Maimon, head of fraud insights at SentiLink, a San Francisco-based fraud and risk solutions firm, were also on the panel.

Kwapiszeski said that financial institutions need to improve their anti-fraud coordination to reap a more proactive posture in the battle, “so that we can start taking down the entire fraud network,” he said.

“An area that I would love to see us kind of get more into, is, how could we use AI across the institutions to really get better pictures of how the network is actually holding together, and just like any other criminal enterprise, if you take down certain parts of it, it all kind of comes crumbling down,” Kwapiszeski said.

Legislatively, financial institutions need a modernized safe harbor provision to offer enhanced liability protections as they coordinate their anti-fraud efforts, Turner argued. The industry’s current, limited safe harbor protections derive from the Bank Secrecy Act, which allows financial institutions to share data related to suspected money laundering or terrorist activity.

Benda contended that the BSA’s safe harbor limitations argue for a different regulatory approach to empower information-sharing among banks and non-banks.

The current BSA provision has timelines that don’t prevent or stop fraud and only financial institutions are covered by it, and not other sectors, Benda said. “It’s never going to be a functional tool in preventing fraud,” he said.

The government’s role in combating financial fraud gained new relevance last week when President Donald Trump issued an executive order on cybercrime, mandating a federal review within 60 days of tools and capabilities that could be mustered against “transnational criminal organizations.” 

The order also called for an “action plan” within 120 days “to prevent, disrupt, investigate, and dismantle” the criminal groups perpetrating online frauds.  

Trump has also nominated a Justice Department attorney, Colin McDonald, to lead a new national fraud enforcement division within the department. McDonald is awaiting a Senate vote on his confirmation.