The American Bankers Association is creating an information-sharing exchange that member banks will be able to use to get the names and account information of suspected scammers almost in real time.
The exchange, which has yet to be named, is designed to combat a range of financial crimes from fraud to money-laundering to the financing of terrorism, ABA President and CEO Rob Nichols said Tuesday at the trade group's financial crimes enforcement conference.
"We believe this effort can make a real difference in fighting financial crime," Nichols said.
Combating fraud is an expensive and frustrating challenge for banks of all sizes. Pre-pandemic fraud risks, including those related to in-store credit card purchases,
Another top-of-mind risk for banks is check fraud. During a six-month period earlier this year, Regions Financial in Birmingham, Alabama, reported losing $135 million to bogus checks.
In fraud cases known as business-email compromise, the platform that the ABA is building would help banks alert other financial institutions with key information about the account of the alleged fraudster, said Paul Benda, executive vice president of risk, cybersecurity and fraud at the ABA. That information would allow banks to freeze accounts with funds that may have been obtained fraudulently, and to prevent additional fraudulent transactions, he said.
"The idea here is to allow banks to share this information amongst other banks in a near-real time manner so they can integrate this data into their payment flows, into their risk-scoring systems, to stop that money from going out," Benda said.
Plans for the platform have been in the works for more than two years, Nichols said. That time was spent working with 20 member banks to develop a framework for the platform, he said.
Those same 20 banks will participate in the first test of the exchange, which is scheduled for early 2024. The ABA said its long-term goal is to make the exchange available to all financial institutions that are covered by section 314(b) of the Patriot Act. The 2001 law gives financial institutions the right to share information that could be used to identify transactions that might involve money laundering or terrorist activities.
The current process for sharing this kind of information is slow, disjointed and mostly takes place via email, the ABA said. Currently, member banks report difficulty accessing relevant information in real time and connecting the dots, Nichols said.
"One of the most important tools we have to combat financial crimes is shared information," Nichols said.
Earlier this year, the trade group launched a check fraud claim directory. The directory is a searchable database that gives banks easy-to-access contact information for filing check-related claims with fellow financial institutions.
