Addressing Instant Payment Fraud on a Global Scale: “The Great Disappearing Act”

instant payment fraud and how to fight back

November 16, 2023

The NYPAY event on November 9, 2023, “The Great Disappearing Act: Decoding the Enigma of #InstantPayment #Fraud and Fighting Back Globally,” was hosted by Deborah Baxley, a partner with PayGility Advisors and co-founder of NYPAY. The aim was to discuss challenges and insights into combating real-time #payment fraud globally. Panelists included Peter Tapling, APRP of PTAP Advisory, Rebekah Moody from Darwinium, along with Carla Leticia Sanchez-Adams, an attorney with the National Consumer Law Center.

The Rise of Instant Payment Fraud

The core of the discussion was the increasingly prevalent issue of Authorized Push Payment (#APP) fraud. This type of fraud involves victims sending money directly to scammers under false pretenses.

Highlights and Insights

  • Global Lessons Learned: we reviewed some research from R. Andrew Gómez of Lipis Advisors, which examined the rise of APP fraud and traditional non-authorized fraud like account takeovers in 6 countries.  The UK and Japan have protective regulations addressing APP fraud, unlike the US where consumers and businesses bear the liability (under Reg E) for such fraud.  Global fraud mitigation methods include centralized fraud monitoring, payee confirmation, and shared fraud data systems, contrasting with the US’s more limited approach of transaction limits and awareness campaigns.  This global research highlights the importance and challenges of industry collaboration in the US for fraud prevention, with concerns around antitrust, legal liability, and privacy.
  • Fraudulent Techniques Unveiled: The panel shed light on the intricate methods used in this type of fraud. For instance, Peter Tapling discussed the complexity of detecting these schemes, saying, “Fraudsters are continually evolving their tactics, staying a step ahead of detection methods.”
  • #ConsumerProtection Gaps: The panel pointed out the significant lack of consumer protection against such fraud in the US compared to more robust frameworks in the UK and Japan. Carla Sanchez-Adams emphasized the importance of regulatory measures to safeguard consumers.
  • Innovation and #Regulation Interplay: There was a detailed discussion on the need for innovative solutions that don’t compromise consumer safety. Rebekah Moody stressed the importance of banks recognizing and responding to atypical customer behaviors as potential fraud indicators.

Concrete Examples

  • Rebekah Moody provided an example of a family friend who was a victim of a sophisticated crypto investment scam, leading to a substantial financial loss.
  • Carla Sanchez-Adams discussed cases where consumers received calls from fraudsters impersonating their banks, illustrating the complexity and convincing nature of such scams, and raising the question of how consumers are expected to protect themselves.

Industry Collaboration and Consumer Education

The whole group emphasized the need for a collaborative approach in the financial industry to share information and best practices in fraud prevention, and highlighted as a critical component education of consumers on recognizing and avoiding fraud.

Key Takeaways from Panelists

  • Peter Tapling urged for a careful approach towards regulation that doesn’t hinder technological innovation in payment systems.
  • Carla Sanchez-Adams called for more stringent consumer protection laws to build confidence in digital payment systems.
  • Rebekah Moody highlighted the importance of banks deploying advanced behavioral analysis tools to detect unusual patterns indicative of fraud.

Conclusion:

The event concluded reflecting a consensus on the need for continued dialogue and joint efforts to address the challenges of instant payment fraud effectively. The session, as well as participation in industry bodies such as U.S. Faster Payments Council, serves as a platform for sharing experiences and strategies, furthering the collective goal of enhancing security in digital payment systems.

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