May 20, 2023 / VOLUME NO. 262

You’ve Got Fraud Mail

The other day, Rene Perez got an invitation to join an online group. When he logged in, he saw people were discussing how to target financial institutions and which ones were vulnerable. It was like an virtual conference, but for fraudsters. The invitation appears to have been an accident. After all, Rene Perez is director of sales for financial crime solutions at Jack Henry & Associates. 

One of the most eye-opening trends coming out of the pandemic is the professionalization and online organization of financial crimes. As people in general make more connections online and learn more through online tools, so too are the fraudsters. “They’re communicating just like we’re communicating in the fraud world,” Perez said at a recent Jack Henry event in Denver. 

Perhaps that’s the reason for the uptick in check fraud and phishing. Perez got a text message recently that purportedly came from his boss. The text said: “I haven’t heard from you, and now your job is on the line.” The red flag was that the texter didn’t want to talk on the phone and claimed he could only communicate by text. 

It turns out, phishing attempts and attacks similar to the one Perez got were a top fraud concern for financial institutions in Jack Henry’s 2023 Strategic Priorities Benchmark Study. Three-quarters of bank CEOs said phishing attacks were one of their top three fraud concerns; 60% named ransomware, 52% named data breaches and 37% named real-time payments fraud. The responding CEOs represented 118 financial institutions that are core clients of Jack Henry, including credit unions. 

Unfortunately, it appears that digital channels are facilitating fraud at the same time they’re facilitating easier transactions. The threat from scams increases with real-time payments, where the money transfer is nearly instantaneous and irrevocable. The Federal Reserve plans to launch a real-time payments network named FedNow this summer to facilitate such transactions. 

In the United States, financial institutions don’t like to publicize instances of scams and fraud, so the extent of the problem is a bit of a guessing game. Sam Truitt, a senior analyst for Jack Henry, argued that the U.S. financial industry can improve data sharing to counteract the organized criminals that are attacking them. I can’t agree more. A financial industry that communicates as well as the fraudsters do could go a long way in countering the problem. 

• Naomi Snyder is editor-in-chief of Bank Director

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