As fraud continues to rise, banks are working hard to protect and educate clients

EDUCATION IS THE KEY 

Paul Burdiss 

Banks can install sophisticated security systems and lock away cash behind 10-inch-thick steel vault doors, but the most important way they can help protect their customers’ money is by educating consumers and businesses about fraud. The insidious problem of fraud continues to devastate unwitting individuals and organizations, affecting their immediate and long-term financial well-being.

According to Federal Trade Commission data from 2023, fraud losses in the U.S. topped $23.7 billion, though that figure could be as high as $158 billion, according to agency estimates. Nearly 29 percent of bank customers and 22 percent of credit card customers — more than one in four customers — fell victim to some form of financial fraud in the past 12 months, according to a survey on U.S. financial protection satisfaction by J.D. Power. The same survey showed that customers value banks for helping them resolve fraud-related issues. But equipping clients with tools to identify and prevent fraud before it happens is critical.

Consumers Need to Know "#BanksNeverAskThat"

For the past five years, the American Bankers Association (ABA) and banks across the country have promoted a consumer protection initiative to combat the growing threat of fraud and scams. The “#BanksNeverAskThat” anti-phishing campaign has educated millions of bank customers about common scams from bad actors posing as their bank. The campaign that runs each October, which is National Cybersecurity Awareness Month, and beyond uses humor to grab consumers’ attention and offers tips and resources to help bank customers protect themselves from the most prevalent phishing scams targeting Americans. Since the campaign launched in 2020, the ABA and more than 2,300 participating banks have achieved impressive results, including over 21 million impressions from social media and digital ads and nearly 1 million unique visits to the campaign website, www.BanksNeverAskThat.com.

Consumers can learn to spot fraudsters by watching out for urgent warnings or requests. Scammers often try to create a sense of panic, such as threatening to suspend an account or urging people to log in to verify an account. Real banks won’t do this. If the caller, texter or emailer pressures immediate action or threatens negative consequences, consumers should just hang up and call the number on the back of their bank card.

Odd grammar and spelling mistakes can also be signs of an impersonator. Additionally, email addresses can sometimes be misspelled or suspect in phishing attempts. If a text message, email or caller requests personal or sensitive information, such as account numbers, PINs, passwords or social security numbers, bank customers can assume it’s a scam. Banks rarely — if ever — send links via text. People should avoid clicking links or calling any phone numbers provided in the message.

Normally, bank representatives will only reach out if customers initiate contact first. So, consumers should also be very skeptical of unexpected phone calls. It’s best to end a suspicious call. Customer can always double-check if their bank reached out to them by calling the bank’s publicly listed customer service number, or the number on the back of their bank card.

Check Use is Down, But Check Fraud is Up

Despite a significant decrease in check usage, reports of check fraud have nearly doubled since 2021, according to a 2023 report from the Boston Fed, and those numbers continue to climb. Much of this fraud is attributed to criminal gangs that are targeting the U.S. mail to steal checks, wash and alter them and ultimately steal money from banks and their customers.

To address the resurgence of check fraud, the ABA has introduced a new awareness campaign called "#PracticeSafeChecks." At the Pac-ticeSafeChecks.com website, consumers can learn practical tips to protect themselves from check fraud, including using their bank’s digital options to send money whenever possible. When consumers do write a check, they should consider using a black gel pen. This type of ink is more difficult to remove. If they need to send checks by mail, using the mailbox inside of a U.S. Postal Service facility rather than a curbside or residential mailbox is advisable. Of course, most people know they should not share or post their bank account information anywhere publicly. At the same time, they should also not save routing/transit and account number information on websites.

Because of the pervasive problem of check fraud, the ABA is also conducting a feasibility study to explore the creation of a system that would enable banks to verify a check in real time before accepting it for deposit — stopping fraud before it occurs.

Small Businesses Are a Prime Target

Small businesses can be especially vulnerable to fraud. The Association of Certified Fraud Examiners reports that 30 percent of fraud cases occur in small businesses (those with fewer than 100 employees) and 60 percent of small business fraud victims are unable to recover their losses. When businesses fall prey to a scam, the effects can have long-term impacts on client relationships and profits.

The Federal Trade Commission recommends that small businesses watch out for unordered merchandise and fake invoices. Directory scams also target small businesses by selling ad space or listings in a non-existent directory.

According to the 2024 AFP Payments Fraud and Control Survey, 80 percent of respondents report that their organizations were victims of attempted or actual payments fraud activity in 2023, and 65 percent reported that checks continue to be the payment method most vulnerable to fraud.

Businesses that accept a high volume of checks should explore payment fraud protection options at their banks. For example, Zions Bank offers a Positive Pay system to compare checks presented for payment against their check issue information. Discrepancies are reported to business owners as exceptions for review then they make the decision to pay or return the item.

The ABA recently launched a database of bank fraud contacts to more efficiently resolve potential fraud claims between banks. Recently the database helped a small bank in Mississippi work with a large institution to recover $71,000 for a customer. More than 2,100 banks are participating in the database. The resource helps banks connect with other institutions to resolve warranty breach claims for checks as well as claims for unauthorized and/or fraudulent transfers for wires and other financial transactions.

Because we want our consumer and business clients to succeed and grow, banks are doing all we can to equip them with tools and knowledge to protect them.

Paul Burdiss is president and CEO of Zions Bank in Salt Lake City.