Moving to Proactive Data Sharing Across Institutions to Combat the New Wave of Financial and Human Crimes

Dear Fellow Fraud Fighters,

We can all do more to fight SCAMS. As someone who has shared the day-to-day challenges of the fraud-fighting realm, I would like to offer solutions regarding the ever-growing manipulative and destructive market of scams. I’ve been a fraud fighter for almost 25 years, and I understand the daily challenges of meeting operational plans, fraud loss targets, and fielding customer complaints.

You have a challenging job, but from conversations I have with you all regularly, I know you love and value it. Because there’s so much upside to our rewarding positions. But there’s a lot of work that needs to be done…

Human Trafficking Victims are Being Forced to Commit Scams

Recently, ProPublic published an article, which indicated scams are being perpetrated by victimsof human trafficking. Read that again: Victims of human trafficking are perpetrating scams. Sadly, Criminals are forcing these victims to commit scams to fund their evil enterprises. This is manipulation at its most extreme.

Victims Scamming Victims

So when human trafficking victims are being forced to commit scams, who are they targeting? In short: all of us, because they are being forced to. Sadly, as we know all too well, victims of these scams are losing their life savings, financial dreams and sometimes their dignity in the process.

We are all vulnerable to these scammers – and it’s increasing. That’s why it’s crucial we do more for the sake of our children, our parents, future generations, and each other.

What I believe needs additional attention is that these funds are leaving our legitimate customer accounts, being muled through our financial system, and ending up funding illegal enterprises such as human trafficking, drug trafficking, and other complex criminal rings.

So, what more can we do to fight authorized scams? Let’s start with these five things.

1. Program

According to The Knoble’s2022 Scams survey, 47% of financial institutions do not formally track scams. As many of us learned early on, it’s hard to fix what we don’t measure. Once we start measuring the impact, we can appropriately establish programs and justify investments.

We need to create comprehensive anti-scam programs at our institutions, like those we build for other fraudulent activities. These programs need to include everything from policies, risks, appetites, taxonomies, and complete procedures.

2. Deterrence

I was recently speaking at a global fraud conference to some of the top anti-fraud professionals in our industry. When we talked about this type of threat, there was a conversation about not being able to “train stupid.”

I am not bringing this up to shame any of the respected professionals who I had the privilege to speak to. Many of them are talented, passionate and successful in our industry, and do not intend to harm scam victims. I seek to remind all of us as fraud fighters, that scams are fraud.

As fraud professionals, with our rewarding and amazing positions, we have the duty to fight fraud, regardless of liability. I know that’s hard to hear and even to say—however—we are fraud fighters first.

It’s time that we get collaborative and creative, with our training, our technologies, and our programs. No matter where you fit in the fraud-fighting mix, it is time for each of us to step up and be protectors to our customers. By merely being reactive, we all lose.

3. Operational Treatment:

We need to stop treating all fraud the same. There’s been a race to automate, offshore and remove our employees from fraud verification processes. At this point, it doesn’t appear that this same approach is going to work for scams.

On the other hand, the scams are preying on the loneliness and vulnerability of all of us, leaving victims scared and sometimes emotionally harmed.  In these situations, it is going to take some handholding and care. Our fraud detection teams need to be caring, sincere, and helpful. Let’s automate the heck out of the traditional unauthorized fraud that we’re so good at and deploy our resources to protect the innocent.

Also, fraud detection is getting more complicated, requiring us to rethink our staffing model. Why not look for resources to meet this challenge and add mission to your operational efforts?

For this reason, Omega is launching a new fraud managed service where we are training and staffing survivors of human trafficking. Why? Because these amazing people need great jobs, and we need great people. I don’t want to oversimplify the complexity around building out a program like this, but how amazing would it be to find a way to create and build a high-performing compassionate anti-fraud team, staffed with the best people, empowering them to fight back, and know that you are restoring hope in the process.

4. Collaboration

We use consortiums across all our major fraud threats: card, devices, mortgages and even automotive lending (thank you Frank McKenna and Tim Grace for brining this to mortgage and auto). We must find ways to share information to fight these threats and mules.

I’ve had numerous conversations with networks, processors and solution providers about building a scams/mule consortium where we can—in a safe and non-invasive way—begin risk-scoring money movement to detect mule activity and abnormal customer behavior looking for scams. We’ve proven repeatedly in the fraud space, that we can do this safely, securely, and preserve individual privacy. We need all these organizations to step up and build something that cuts across the industry.

On a related note, get plugged in to each other. We need to innovate together, not just in word, but in practice. I encourage you all to join The Knoble Network. We are free to all financial services, sharing proven practices and creating an environment of sharing. As I always say: “Fighting evil is not competitive”. The last Scams Roundtable had almost 100 FIs, technology and service providers join and share. Let’s do this together.

5. Detection

We have some of the most advanced channel, instrument and fraud-type technologies, being utilized to protect banks and customers. The type of controls that are deployed in the private sector never cease to amaze me. But we’ve built these controls in isolation and over compartmentalization within channels, instruments and lines of business.

We need to take a more holistic view of our customers and take a page out of the playbook for our AML counterparts. We need to modernize, connect and re-score our transactions and solutions holistically—and start looking at customer risk.

This will help not only scams, but also help us fight the growing problem of first-party fraud. This is not an option.

• Solution providers, please work together on integration.
• Processors, you’re in such a unique position, arguably held by no one else.

Please make the investments needed to start helping institutions of all sizes manage this increased fraud risk at scale by deploying comprehensive and holistically integrated services and solutions.

The Elephant in the Room: Liability

Lastly, I know there’s a lot of attention on liability right now. I understand why. It’s critically important. Not just with respect to how much your fraud loss line will increase, but it’s incredibly important for how the industry will give the needed attention to this top financial crime problem around the globe.

In my nearly 25 years fighting fraud, I don’t recall another time where fraud fighters have waited for a regulatory change to fight fraud (sans arguably mortgage in 2000’s for some). We are some of the most innovative, resourceful, and resilient professionals across financial services. We can do the right thing even before regulation forces us to.

Let’s start working together, challenge each other, and do the right thing for our society. I don’t think this is a fraud loss problem, nor a bank problem. This is a human problem, which impacts all of us. Therefore, the responsibility to create solutions is ours to share.

I know many of you are well on your way. A huge ‘thank you’ to banks like Citi, MidFirst Bank, and leaders like Jeff Crawford, Bradley Haacke, MBA, CFE, J. Candler Eve, MBA, CFE, CAFP, Seth Sattler, CAMS, Eva Casey-Velasquez, Ken Palla, Trace Fooshée for stepping out leading the way… I know there are many more.