    [Senate Hearing 118-592]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-592

                    EXAMINING SCAMS AND FRAUD IN THE BANKING
                     SYSTEM AND THEIR IMPACT ON CONSUMERS
    =======================================================================

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

      EXAMINING SCAMS AND FRAUD IN THE BANKING SYSTEM AND THEIR IMPACT ON
                                   CONSUMERS

                                   __________

                                FEBRUARY 1, 2024

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                                    __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    59-592 PDF                  WASHINGTON : 2026
    -----------------------------------------------------------------------------------

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                   Lila Nieves-Lee, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                      Amber Beck, Republican Chief Counsel

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                           Pat Lally, Assistant Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                           THURSDAY, FEBRUARY 1, 2024

                                                                       Page

    Opening statement of Chair Brown.................................     1
            Prepared statement.......................................    38

    Opening statements, comments, or prepared statements of:
        Senator Scott................................................     3
            Prepared statement.......................................    39

                                   WITNESSES

    Carla Sanchez-Adams, Senior Attorney, National Consumer Law
      Center.........................................................     6
        Prepared statement...........................................    42
        Response to written question of:
            Senator Butler...........................................    89
    Paul Benda, Executive Vice President, Risk, Fraud and
      Cybersecurity, American Bankers Association....................     8
        Prepared statement...........................................    76
        Response to written question of:
            Senator Britt............................................    91
    John Breyault, Vice President of Public Policy,
      Telecommunications, and Fraud, National Consumers League.......    10
        Prepared statement...........................................    85
        Response to written question of:
            Senator Butler...........................................    93

                  Additional Material Supplied for the Record

    Statement submitted by BPI.......................................    94
    Letter submitted by AFSA.........................................    99
    Letter submitted by CBA..........................................   101
    Statement submitted by ICBA......................................   103

                                     (iii)

      EXAMINING SCAMS AND FRAUD IN THE BANKING SYSTEM AND THEIR IMPACT ON
                                   CONSUMERS

                                  ----------

                           THURSDAY, FEBRUARY 1, 2024

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10:06 a.m., in room 538, Dirksen
    Senate Office Building, Hon. Sherrod Brown, Chair of the
    Committee, presiding.

                OPENING STATEMENT OF CHAIR SHERROD BROWN

        Chair Brown. The Banking, Housing, and Urban Affairs
    Committee will come to order.
        When consumers send money through an app or send a check in
    the mail, they are supposed to be able to trust that financial
    companies are protecting their money and will help them if
    something goes wrong. Yet that is not what we see.
        Scammers and fraudsters have ramped up their efforts to
    take people's money. Banks and payment apps have stood on the
    sidelines while the problem has only gotten worse. Pretty much
    everyone has either been scammed, or knows someone who has been
    scammed, when trying to use a financial service.
        Today one of the most popular ways people send money is
    through so-called peer-to-peer apps like PayPal, Venmo, Cash
    App, and Zelle. These apps are now part of most Americans' day-
    to-day lives. Seventy-five percent of adults have used at least
    one of them. Forty percent of Americans report using them at
    least once a month.
        Where consumers see convenience and accessibility, scammers
    see an opportunity.
        In 2022, one major payment app had more than $100 million
    in ``unauthorized transactions.'' Another had almost $60
    million.
        Of course, it is not just new technology or payment
    methods, of course, that scammers target. Check fraud is as old
    as our banking system. They will steal a check from the mail,
    use chemicals to wash off the key details, then fill it in with
    the details they want and deposit it.
        You might think that more people using apps would make
    checks less of a target, but it seems to be the opposite--check
    fraud is getting worse too. Last year, the Financial Crimes
    Enforcement Network noticed a rise in check fraud so drastic
    that they issued a public alert.
        My colleagues and I wrote to the American Bankers
    Association expressing concerns on the issue, and they created
    an information directory providing contact information for
    banks to resolve check fraud claims. By the end of 2022,
    depository institutions had reported more than 500,000
    incidents of check fraud, more than double the year before.
    Scammers broke their record again in 2023. So the evidence
    clearly shows it is getting worse.
        The same goes for wire transfers. Scammers target wire
    transfers because they can steal a larger portion of consumers'
    savings through wire transfers. Americans will often use wire
    transfers when they want to send large amounts of money, like
    when buying a house.
        Imagine a family in the process of buying a home, juggling
    all the details of the process, along with the excitement that
    they have of reaching a major life milestone. On top of
    everything else they have to worry about, they have to defend
    against scammers posing as a real estate agent or title company
    targeting the family's downpayment. In 2023, consumers lost at
    least $270 million to wire fraud.
        And now we are faced with the possibility that artificial
    intelligence will make these problems worse. As just one
    example, scammers can now use AI to clone a person's voice to
    bypass voice authentication procedures. Banks, payment apps,
    and other financial institutions are not doing nearly enough to
    prepare for the threat AI poses in increasing the scale and the
    impact of scams.
        All of these problems with scams are rampant.
        In Dublin, Ohio, a suburb of Columbus, a retired FBI agent,
    wrote a check for less than $200. Someone stole that check from
    a mailbox right in front of a post office, changed the number
    to $8,590 and cashed it.
        In another case, a 17-year-old student in Ohio received an
    acceptance letter from her dream college. Someone posing as
    another admitted student reached out and scammed her out of
    almost $3,000 of her own money through Zelle. That $3,000 was
    three-quarters of her college money she saved up by working at
    a discount drugstore. None of this mattered to the bank. As far
    as the bank was concerned, this young woman was responsible for
    the money and additional fees for depositing bad checks. In the
    end, she got her money back, but only after the efforts of a
    very tenacious mother, who tracked down the local executive of
    the bank.
        No one should have to go to those lengths because banks,
    payment apps, and other financial institutions cannot get their
    act together to protect their customers. When these incidents
    happen, people lose their hard-earned money. And they are often
    made to feel ashamed and embarrassed.
        No one ever tells a victim of a hold-up or a break-in at
    their home that they were stupid or should have known better
    than to be robbed, but that is exactly what consumers who are
    scammed too often hear.
        Let's be clear, being scammed has nothing to do with
    savviness or intelligence or education.
        Just last year, a retired White House scientist was scammed
    out of $655,000 of her retirement savings. Those scammers were
    organized. They sent her a pop-up message on her computer,
    rerouted a phone call she meant for her bank, and kept her on
    the phone for days on end. She still wonders about what she
    could have done differently. But no one should have to think
    about that question.
        And to be clear, the answer to these types of stories is
    not to warn people to be better prepared or put millions of
    consumers through a so-called ``financial education'' course.
    Of course we all need better financial education, but that is
    not the backstop for all of this. Americans do not have time
    for that. They have jobs and kids and bills to worry about. It
    is not on them. It is on the companies that allow the scam.
    People should be able to have an expectation their money is
    safe when they have a reputable bank.
        People lose their money because payment apps and banks do
    not put enough measures in place to protect their customers.
        For example, among the peer-to-peer companies, Cash App
    refunded just 16 percent of unauthorized transactions in
    calendar year 2022, just $1 out of $6. Zelle claims they
    reimburse consumers who have been victims of imposter scams,
    but their website states that since the consumer ``authorized
    the payment, you may not be able to get your money back.'' It
    is unclear whether Zelle will actually reimburse victims of
    imposter scams. They need to clarify instead their
    reimbursement policy.
        These companies need to step up, and they apparently need
    rules to make them do it, not more financial education. These
    banks, payment apps, and other financial services companies
    have shown us they need, shall we say, some encouragement.
        The Consumer Financial Protection Bureau has a proposed
    rule that is one strong first step. It would help ensure that
    companies like Venmo, Cash App, and Zelle follow Federal
    consumer protection laws. This is what the CFPB does--protect
    consumers and their hard-earned money. When the CFPB is
    empowered, it ensures that the financial system works for
    consumers, not just big companies.
        With millions of users, it only makes sense that these
    companies do more to protect consumers' money. Because as we
    have seen in previous hearings in the last 3 years, frauds and
    scams are not unique in consumer finance. They are also common
    within cryptocurrency. We will keep pushing to make our
    financial system safer, whether its stopping rampant frauds and
    scams in cryptocurrency or in apps and check fraud.
        I hope we can discuss more today about how banks, payment
    apps, and other financial service companies can step up for
    their consumers and actually earn their trust back.
        Senator Scott.

                 OPENING STATEMENT OF SENATOR TIM SCOTT

        Senator Scott. Thank you, Mr. Chairman.
        I will start off by saying, I guess Steven Spielberg was
    onto something when he named the movie ``Catch Me If You Can''.
        Recently, I saw a movie called ``The Beekeeper'', which
    starts off about financial scams that led to the grandmother's
    suicide. Now, financial scams may not today lead to suicide,
    but without any question, they certainly kill your hopes, your
    dreams, and your sense of financial security.
        The impact of financial scams, especially on our senior
    citizens, is undeniable. Having been the Ranking Member on the
    Aging Committee, we have had many, many hearings about the
    devastation of retirement savings lost. Lives changed.
    Grandmothers looking for a place to call home, moving back in
    with their kids or their grandkids. The devastation is so real,
    and so often, goes unreported in some instances. And certainly,
    the investigations leave many wanting.
        Even in a largely digital age, more traditional forms of
    fraud continue to flourish. We think about the fact that
    whether it is check fraud, wire fraud, or mail fraud, we have
    seen a resurgence of criminal activity in these spaces, in
    addition to of course the new types of fraud that comes along
    with the technological advancements that we have seen around
    our country, and certainly the innovations around the world.
        Not only do I think of my own mother--who celebrates a
    birthday this weekend as a senior citizen--I think of every
    single South Carolinian who trusts that their money is safe
    when they write a check and place it in the mail, or transfer
    money to their grandkids.
        Mr. Benda, I thank you for bringing your expertise and
    talking about the different kinds of fraud that can impact
    American consumers. Protecting consumers and preventing fraud
    are critical pillars of our financial system and, frankly, what
    our society deserves.
        For many families, becoming a victim to these scams is
    equivalent to wiping out a lifetime of savings, and not just
    the dollars in the account, but the thought that you are no
    longer safe to transact business anywhere, in any form.
        For many, it is the worry that their identity is
    compromised, that their credit score is impacted, and they
    struggle to realize just how will they survive and afford,
    whether it is their rent, or mortgage, or even simply
    groceries, which in today's inflationary economy is even harder
    than it was before.
        Speaking of dollars, let's just count the costs. Nine
    billion dollars in 2022 is the cost of financial fraud. A
    staggering number.
        Unfortunately, these criminal acts of fraud and theft are
    not new, and criminals like these continue to prey on the
    vulnerable.
        This is precisely why our financial institutions and
    financial industry participants should--and do--spend billions
    of dollars developing and implementing innovative technologies
    to strengthen security that will protect families and
    businesses from fraud.
        But on the other side of the coin, we have not seen the
    same commitment from our Federal regulators. Recently, our
    regulators seem to be more focused on political grandstanding
    than promoting innovative solutions, protecting consumers, and
    increasing efforts that support financial education. And
    instead of focusing on real crimes and holding criminals
    responsible, this Administration seems intent on tying up
    financial institutions with ever-increasing amounts of
    Washington red tape.
        Recently, the CFPB has continued its deceptively named
    ``junk fee'' campaign, targeting legitimate, contractually
    agreed upon payment incentives. In its latest proposals, the
    CFPB uses legal gymnastics to turn penalty fees into loans
    while slapping the label ``abusive'' on any practice it just
    does not like. The CFPB is sending a clear message: it is
    willing to stretch the law beyond its limits to suit Director
    Chopra's political agenda.
        And every dollar spent navigating Washington red tape is a
    dollar less on initiatives that actually help families and
    protect businesses. It is a dollar less for bolstering a firm's
    cyber defenses in the investment world that may prevent or even
    catch fraud before it happens. Unfounded bureaucratic
    regulations take resources away from financial innovation and
    education, both of which can help lift up the underserved and
    minority communities.
        What concerns me even more than all of this is recent
    allegations that suggest that Federal law enforcement and
    financial regulators may be expending their resources to target
    Americans for their political and religious beliefs. Instead of
    targeting Americans for purchasing Bibles or shopping at the
    Bass Pro Shops, our Government should focus on doing its job,
    protecting our families and prosecuting actual criminals,
    including those behind financial scams. Unfortunately, these
    examples are part of a larger trend we have seen from this
    Administration of putting politics first.
        For example, banking regulators were so focused on climate
    change that they failed to identify the key risk factors
    leading to the second-, third-, and fourth-largest bank
    failures in our Nation's history last spring. And again, if the
    CFPB was not so focused on building a public pressure campaign
    against so-called ``junk fees,'' maybe it could do its job and
    actually protect consumers from the real harm that comes from
    being a victim of financial crime.
        One of the best tools any of us have to fight back against
    financial crimes is to become better educated, both about the
    financial products and protections that are available to us and
    about the scams and methods criminals are using against us. In
    fact, I have long championed the idea that financial education
    and financial literacy is one of the most important and most
    critical tools for climbing the ladder of success in America.
        It is why I have worked so hard to incorporate financial
    literacy in my work here on this Committee, and financial
    literacy is a core pillar of two of my initiatives, the ROAD to
    Housing and Capital Markets framework. And I was so proud to
    work across the aisle with Senator Reed last spring to pass a
    resolution declaring April Financial Literacy Month.
        As we discuss the very real issues of financial fraud and
    crime, we must take a holistic approach. Our financial
    institutions must do their part to protect, to serve, and
    educate customers. And our regulators must do their job and
    implement the law Congress enacted, not their political wish
    list.
        We must all work together to gain a better understanding of
    the options before us so that we are able to best serve our
    communities, our constituents, and our Nation.
        I look forward to hearing from each of the three witnesses.
        Chair Brown. Thank you, Senator Scott.
        I will introduce the witnesses. Ms. Carla Sanchez-Adams,
    Senior Attorney, National Consumer Law Center. She focuses on
    banking and payment systems, fintech, and high-cost lending.
    Welcome, Ms. Sanchez-Adams.
        Mr. Paul Benda is Executive Vice President of Risk, Fraud,
    and Cybersecurity with the American Bankers Association. Mr.
    Benda, welcome.
        Mr. John Breyault is the Vice President for Public Policy,
    Telecommunications, and Fraud for the National Consumers
    League. Welcome, Mr. Breyault.
        Ms. Sanchez-Adams, please begin.

      STATEMENT OF CARLA SANCHEZ-ADAMS, SENIOR ATTORNEY, NATIONAL
                          CONSUMER LAW CENTER

        Ms. Sanchez-Adams. Chairman Brown, Ranking Member Scott,
    and Members of the Committee, thank you for this opportunity to
    testify on behalf of the National Consumer Law Center's low-
    income clients.
        Payment fraud is everywhere and impacts all Americans, even
    Members of Congress. In fact, if you do a Google search on how
    to address payment fraud you will get 491 million responses.
        However, the impacts of payment fraud are most keenly felt
    by certain low-income communities, older Americans, and
    communities of color. These communities, who are already
    struggling and often pushed out of the traditional banking
    system, can least afford to lose money due to payment fraud and
    errors.
        Fraud is also occurring over all types of payment methods,
    as you heard earlier. Bank-to-bank wire transfers, checks, can
    now be done online and through mobile and digital applications.
    And fraudsters exploit the ease of these newer technologies as
    well. As you heard, they spoof phone numbers from real
    financial institutions, they utilize deep fakes, psychological
    manipulation, and even use force and threats of violence to get
    consumers to initiate transactions.
        Payment fraud can be sorted into two buckets: unauthorized
    and fraudulently induced. The unauthorized bucket is the one
    where fraudsters initiate a transaction without the consumer's
    authority. The fraudulently induced bucket is the one where the
    consumer initiates a transaction but only does so as a result
    of a fraudulent scheme involving deception and manipulation by
    the fraudster.
        Now consumers are impacted by both, but the responses they
    receive will depend on the type.
        Currently, if you are a victim of payment fraud, your only
    hope of getting your money back is if it happened through an
    unauthorized electronic funds transfer, and that is because of
    the strong protections of the Electronic Funds Transfer Act, or
    the EFTA. However, even if you are in this unauthorized bucket,
    if it happens through a bank-to-bank wire transfer, through
    check fraud, forgery, or alteration, or through an Electronic
    Benefits Transfer card, then you are going to face an uphill
    battle in trying to get your money back, and that is because
    these are excluded from the EFTA.
        And if you find yourself over here, your story fits into
    the fraudulently induced bucket, you are going to hear, ``Too
    bad, so sad,'' because there are no clear protections currently
    under Federal or State law.
        But there are steps that we can collaboratively take to
    keep impacts of fraud to a minimum, on both financial
    institutions and consumers, and to incentivize more effective
    use of innovation to prevent payment fraud.
        First, we absolutely cannot push the entire burden of
    payment fraud onto consumers, hoping that financial education
    will solve it. It is important, but it is not key.
        Second, we need to update antiquated laws that offer little
    to no protection to consumers who have been impacted by payment
    fraud. In this day and age where the vast majority of
    transactions happen online or through mobile and digital
    technologies, it makes no sense that only some of these
    transactions are covered by the EFTA while others are not. Wire
    transfers and EBT cards and maybe even checks should have the
    protection of the EFTA. As well as fraudulently induced
    transactions that should have protections under the EFTA.
        Third, receiving institutions should bear more
    responsibility. Currently in the United States there is no
    mandate that institutions who allow fraudsters and money mules
    to open an account and to receive fraudulently induced payments
    reimburse the consumer or the consumer's institution. They have
    Bank Secrecy Act obligations to make sure that their customers
    are not engaging in unlawful activity, including payment fraud,
    but they do not have any monetary incentive to make sure that
    they can effectively prevent their own customers from
    committing fraud.
        Conversely, in the United Kingdom, they have mandated
    reimbursement for fraudulently induced transactions where the
    consumer's institution and the receiving institution split the
    cost 50/50. Now if we did that here, and the receiving
    institutions were obligated to pay 50 percent, you could
    believe that they would be doing more to prevent their own
    customers from committing fraud. And they should bear the cost
    because they are allowing this to happen.
        Fourth, any attempts to combat fraud must also be coupled
    with policies and procedures that protect innocent consumers
    who have not engaged in payment fraud but who may have had
    their accounts frozen or their accounts closed due to overly
    aggressive fraud monitoring. They must have the ability to
    dispute the freeze or the closure, to expect money that they
    need to eat or pay rent to be returned in a timely manner, no
    longer than the 10 days provided under the EFTA.
        Fifth, the financial institutions that design and run these
    payment systems need to take more responsibility for making
    these systems safe. It is in their financial interest to do so.
    Confidence and use of these systems will increase as they
    contemplate consumer protections when deciding things like
    safety features, speed bumps, how much fraud screening to
    employ, and whether to sacrifice safety for convenience.
        Finally, we need to share more information about fraud, how
    it is happening, through what payment systems, and who is doing
    it. We need interagency cooperation on the Federal and local
    level, combined with input from financial institutions, trade
    associations, consumer advocacy groups, and other stakeholders.
        Thank you, and I am happy to take any questions.
        Chair Brown. Thank you very much. Mr. Benda, welcome.

    STATEMENT OF PAUL BENDA, EXECUTIVE VICE PRESIDENT, RISK, FRAUD
            AND CYBERSECURITY, AMERICAN BANKERS ASSOCIATION

        Mr. Benda. Thank you, Chairman Brown, Ranking Member Scott,
    and Members of the Committee. I appreciate the opportunity to
    testify today before you.
        My name is Paul Benda. I serve as the Executive Vice
    President for Risk, Fraud, and Cybersecurity for the American
    Bankers Association. Before joining the ABA I had the honor of
    serving in the Air Force and worked at both the Pentagon and
    Department of Homeland Security in leading roles to enhance
    both physical and cybersecurity. I am an engineer by training
    and try to apply those skills to help our members navigate a
    range of operational challenges, including fraud. Our members
    know that fraud takes a financial and emotional toll on their
    customers, and banks of all sizes are taking extraordinary
    efforts to protect and safeguard customer accounts as fraud has
    become more sophisticated.
        Today's fraudsters are using artificial intelligence and
    modern tools to scam customers and small businesses out of
    their money. Banks have a long history of innovating to protect
    their customers, and ABA is doing what we can to support our
    members in this fight.
        In the last year, for example, we launched a new industry
    platform to make it easier for banks to resolve check fraud
    claims. We also developed a new information-sharing tool that
    we believe will make it easier to spot financial fraud.
    Unfortunately, however, the fight against these criminals is
    one that the banking industry cannot win on its own. We believe
    that a unified, cooperative effort between banks, law
    enforcement, regulators, and other stakeholders offers us the
    best chance to fight back against fraud and protect consumers.
        There is no doubt that bank customer scams and fraud have
    been increasing. According to a recent FBI report, there is a
    50 percent increase in reported fraud losses from 2021 to 2022.
    The top three categories of fraud were investment scams,
    business email compromises, and technical support scams.
    Impersonation is a common factor in nearly all of these scams,
    with the criminals often impersonating a bank and asking the
    customer for critical financial information.
        Also worrisome is the rise of check fraud, which has become
    one of the fastest-growing categories of consumer fraud across
    the country, even as the use of checks continues to decline.
        In response to the growing fraud threat, banks are
    deploying new tools and capabilities to identify suspected
    fraud and stop it from happening in the first place. Still,
    there are limits to what banks can do when checks get stolen or
    when sophisticated criminals scam customers into giving them
    their money.
        Here are some of the ways other stakeholders can help us in
    this fight. As detailed in my written testimony, our members
    believe that there are four pillars that will enhance our
    antifraud efforts. First, increase consumer education. The best
    way to reduce fraud is to prevent it from happening in the
    first place, and the best way to do that is empower consumers
    to protect themselves.
        One of ABA's most important consumer protection initiatives
    is our award-winning ``Banks Never Ask That'' campaign. Through
    social media, TV ads, and even stadium scoreboards we have
    educated millions of bank customers on how to spot common scams
    from criminals posing as their bank. The point is to drive home
    the message that a bank will never ask for your password, PIN,
    or Social Security number but a scammer will. To date, more
    than 2,300 banks have participated in the campaign, using
    creative content provided by ABA, entirely free.
        Separately, our Safe Banking for Seniors program also
    provides banks and consumers with free tools and tips on how to
    spot and avoid elder financial abuse. We think there are
    opportunities to expand this kind of consumer education.
        Second, close regulatory loopholes to stop impersonation
    scams. Telephone number spoofing is a major problem. Criminals
    have been able to misrepresent themselves either through a
    spoofed caller ID that shows a legitimate business name or
    phone number or through stolen social media accounts that are
    indistinguishable from real account. ABA supported the FCC's
    efforts to protect consumers from illegally spoofed robocalls
    and the need to have effective authentication requirements for
    calls and texts. We have also weighed in strongly on the need
    to hold any telecommunication provider accountable that
    knowingly allows criminals to impersonal legitimate numbers and
    company names.
        Third, improved information-sharing. The banking sector
    works closely with law enforcement and the regulatory agencies
    and are always looking to develop new ways to share and act on
    critical threat information. At the same time, the regulators
    should exercise care in developing new regulations that could
    inhibit or impede banks' anti-fraud efforts.
        Fourth, enhance collaboration with law enforcement and
    regulators. ABA has a long and proud history of partnering with
    law enforcement and the public sector on outreach activities.
    We work closely with the FBI, the Secret Service, and Treasury,
    and in recent months we launched a nuclear energy initiative
    with the U.S. Postal Inspection Service to combat check fraud.
    We still believe there are additional opportunities for public-
    private partnerships in support of fraud prevention.
        In conclusion, banks are working every day to protect their
    customers from fraud by investing in new technologies,
    deploying public education campaigns, and partnering with law
    enforcement and other Federal agencies. We all recognize that
    more must be done, however, if we are really going to crack
    down on the criminals. It will take a partnership with banks
    and telecom firms, technology companies, and the public sector
    all working together. ABA and our member banks stand ready to
    work with all stakeholders to win the fight against fraud and
    protect consumers.
        Thank you again for the chance to testify, and I look
    forward to answering your questions.
        Chair Brown. Thank you. Mr. Breyault, welcome.

     STATEMENT OF JOHN BREYAULT, VICE PRESIDENT OF PUBLIC POLICY,
        TELECOMMUNICATIONS, AND FRAUD, NATIONAL CONSUMERS LEAGUE

        Mr. Breyault. Good morning Chairman Brown, Ranking Member
    Scott, and Members of the Committee. My name is John Breyault
    and I am the Vice President of Public Policy,
    Telecommunications, and Fraud at the National Consumers League.
    For more than 25 years, NCL has worked via our Fraud.org
    campaign to educate consumers about the warning signs of fraud
    and promote public policies that protect the American public
    from scams of all kinds.
        There is an epidemic of fraud and identity theft in the
    United States. Since hitting a record of 5.96 million in 2021,
    during the height of the COVID-19 pandemic, consumer complaints
    to the Federal Trade Commission have remained exceptionally
    high. Fraud losses have continued to mount, increasing from
    $3.3 billion in 2020 to a staggering $8.8 billion in 2022.
    Median fraud losses more than doubled during that period, from
    $311 to $650. And as you mentioned, Mr. Chairman, these losses
    can often be life savings, a lifetime of work that consumers
    have built up, that is lost to scams.
        When NCL last testified before this Committee in 2021, we
    warned that peer-to-peer or P2P, payment platforms such as
    Zelle, Venmo, Cash App, and others had become a payment method
    of choice for scammers. Unfortunately, the problem has only
    worsened since then. In 2020, the FTC received 62,000
    complaints where payment apps were the method of payment, with
    total reported losses of $87 million. By 2022, reported losses
    from fraud involving these apps had grown to $163 million. We
    anticipate that when the FTC reports its 2023 data this
    regrettable trend will only continue.
        The situation is similarly dismal when it comes to fraud
    involving one of scammers' other favorite payment methods: gift
    cards. In 2020, the FTC received more than 43,000 complaints
    where a gift card was the method of payment, with reported
    losses of $124 million. In 2022, complains rose to 48,800, with
    losses nearly doubling to $228 million. Just this week, NCL
    itself was targeted by scammers who tried to get our staff to
    purchase gift cards by impersonating our CEO.
        As bad as those numbers are, the harm from scammers using
    cryptocurrency as the payment method is even worse. Since the
    FTC first began reporting it as a payment method in 2020,
    losses involving cryptocurrency payments have ballooned from
    $129 million to $1.59 billion in 2022, a tenfold increase in
    just 2 years. Complaints received at NCL's fraud.org website
    last year were littered with references to fraudulent
    cryptocurrency investment schemes, and such scams were by far
    the costliest type of fraud for their victims.
        We are not winning the fight against fraud, and we need
    Congress to act.
        While P2P platforms, banks, and cryptocurrency trading
    platforms profit from ever-increasing transaction volumes, they
    bear little of the cost of fraud that occurs on their systems.
    Instead, the liability for fraud falls on those who can least
    afford to absorb the losses, individual consumers. No amount of
    voluntary consumer education, better disclosure, or friction
    put into payment flows will solve this problem. We believe the
    payment platforms where fraud occurs must have a bigger
    financial incentive to stop scams before they happen. By
    spreading risk across all the participants in the system, the
    costs can be better absorbed, resulting in a safer and more
    secure payments marketplace for everyone.
        Congress can and should play a leading role in creating
    these incentives and preventing fraud on P2P platforms and gift
    cards. We urge Congress to give special priority to passing
    legislation such as the Protecting Consumers From Payment Scams
    Act, which would expand EFTA's definition of ``unauthorized
    electronic fund transfer'' to cover fraudulently induced
    payments. As my colleague, Ms. Sanchez-Adams mentioned, the
    United Kingdom recently enacted a new law that shifts liability
    for fraudulently induced payments from consumer victims onto
    the issuing and receiving banks. We believe the United Kingdom
    is a model for U.S. regulation in this area.
        Cryptocurrency will soon become, and by some estimates
    already is, the payment method of choice for criminal scammers.
    The proliferation of cryptocurrency kiosks in relatively
    insecure retail locations has made them a favorite tool of
    scammers. By one estimate there are more than 34,000 of these
    kiosks across the country.
        Kiosk operators, one of whom was reportedly making a 20
    percent commission on every transaction, lack sufficient
    incentives to crack down on these scams. Senator Warren's
    Digital Asset Anti-Money Laundering Act of 2023 includes many
    needed protections and would do much to begin cracking down on
    the use of cryptocurrency as a payment method. Her bill has
    NCL's full support, and we urge the Committee to approve it.
        In conclusion, I would like to thank you, Chairman Brown
    and Ranking Member Scott, for your continuing work to protect
    consumers and for holding this hearing. On behalf of the
    National Consumers League, thank you for including the consumer
    perspective as you consider these important issues.
        Chair Brown. Thank you. The questions will begin with
    Senator Tester from Montana.
        Senator Tester. Thank you, Mr. Chairman, and I want to
    thank you and the Ranking Member for holding this hearing, and
    I want to thank the panelists for their testimony. I appreciate
    it very, very much.
        I do not think anybody is immune from consumer fraud. I
    certainly have experienced it personally at a time when I was
    very young and could least afford it. Montanans reach out to me
    literally daily about these problems. Constituents have paid
    for services online that they never receive or bad actors
    overseas claiming that something that really does not exist,
    and luckily we were able to connect them with the FBI or other
    resources.
        But these are tough times for people to go through. There
    is no doubt about it. When they have to call my office it shows
    what kind of, quite frankly, difficult times those really are
    and the desperation that they have. We need to be proactive,
    and we all need to be on the same page. I think all the
    stakeholders need to bear some responsibility for what goes on
    here.
        Mr. Benda, you mentioned bipartisan efforts we have taken
    in the Senate Appropriations Committee to facilitate public-
    private partnership to prevent fraud and supporting law
    enforcement to combat these people that are probably the lowest
    forms of life on Earth. So Mr. Benda, are there additional
    tools that law enforcement could use right now that we should
    be looking at?
        Mr. Benda. Thank you for the question, Senator. I think
    information-sharing is going to be the key to help defeat this.
    I think when you look at the lack of coordination that we have
    got on fighting fraud, whether it is the FBI or whether it is
    reporting to FTC, whether it is reporting to regulators,
    whether it is reporting to the U.S. Secret Service, it is
    fragmented, and so it is difficult to spot trends. It is
    difficult to spot where these people are targeting. It is
    difficult for banks to get ahead of it.
        And so I strongly recommend--and I appreciate the language
    that was in that appropriations report. We think coordination
    amongst both law enforcement and private entities is going to
    be key there.
        Senator Tester. One of the things that has always, quite
    frankly, amazed me is when a credit card number is used
    somewhere else and the bank makes me aware of it very quickly.
    I give an example, and I have given it before. Two hoverboards
    were bought in Cleveland, Ohio, on my credit card--and it takes
    two hoverboards for me, so it made sense.
        [Laughter.]
        Senator Tester. And the bank called me up immediately and
    said, ``Have you been in Cleveland, Ohio?'', and they took care
    of it. And I appreciate that and I want to pass that along
    because sometimes we go somewhere, make a charge, and they will
    call us up and say, ``Are you in Spokane, Washington? Is this
    really legal?'' So I appreciate that.
        Senator Hagerty and I have a piece of legislation, with
    other folks on this Committee, the Financial Exploitation
    Prevention Act, which would help folks who lose their
    retirement money to scam. Look, as I see this, from this perch,
    I think the people--and I would like to get a comment on this,
    actually--the people most vulnerable are young people and old
    people. Does that tend to be true? Ms. Sanchez-Adams.
        Ms. Sanchez-Adams. Yes, sir. You know, you generally think
    it is older Americans. They lose the most amount of money, the
    older Americans do, but the ones that are victimized the most
    are younger Americans.
        Senator Tester. OK. That is good to know.
        Well, with this bill that we have with Senator Hagerty, it
    looks to prevent fraudulent activity because it has increased
    over the years. And it allows the company to delay payments if
    they think fraud is going on.
        Mr. Benda, I think it is a really good bill, not just
    because I am carrying it and Hagerty is carrying it but I think
    it could help. It would not absolutely solve all of the
    problems, but I think it could help. Would there be other
    actions you would like to see be done by this Committee or
    other committees to help you do your job?
        Mr. Benda. You know, I am sorry to sound like a broken
    record, Senator, but it really is the information-sharing
    piece. And the
    example I like to give is the sharing of the scam-reported data
    that the telecoms receive. Banks would like to analyze that
    data, look at that data, and then reach out and shut down those
    links and those phone numbers--open source--they do not work,
    so consumers cannot reach them. Right now we do not necessarily
    get access to that data.
        Senator Tester. So one of the things--and I am just going
    to close out with this--one of the things that has me worried
    is AI. You talked about customers and small businesses being
    scammed, and quite honestly, AI is going to start playing in
    this, and hopefully we can use AI to our advantage on the other
    side to prevent it.
        But regular people, myself included, do not understand AI,
    period, and it is going to take a lot of working together to
    make sure that we do not end up in a worse situation than we
    are right now. Because you can damn well bet the bad guys are
    going to use every method they can to try to rip people off of
    money because they do not even know how to get their hands
    dirty to make money in the first place. So thank you.
        Chair Brown. Thank you, Senator Tester. Your experience
    notwithstanding, Cleveland is a great place to live.
        Senator Tester. I hear it is the heart of rock and roll.
        Chair Brown. Yes, and other things.
        Senator Scott. I will direct my first question to Senator
    Tester and the hoverboard. Having been on it for 7 seconds,
    sir, are you sure you did not order either one of those
    hoverboards?
        Senator Tester. I would not know how to ride one of those
    doggone things if I had one, much less two at a time.
        Senator Scott. That is why you remain healthy. Those things
    are crazy. Anyways, thank for the comic relief there, Senator
    Tester. We needed that.
        Senator Tester. Any time.
        Senator Scott. Yes sir. As I emphasized in my opening
    statement, financial fraud and bad actors are not new. Check
    fraud, for instance, has been around, from my perspective,
    forever, since we have had checks, it seems like. And yet
    surprisingly, despite many of the technological advancements
    that we have seen in the financial industry, check fraud
    incidents nearly doubled from 2021 to 2022, and it is on pace
    to increase even more in 2023.
        Mr. Benda, can you please explain how the majority of check
    fraud is being conducted today and who check fraud impacts the
    most?
        Mr. Benda. Thank you for the question, Ranking Member
    Scott. So check fraud is a big challenge for us today, and
    really it impacts Americans of all types. The challenge we have
    got is--and it started with the fact that the mail system is
    not really as secure as we thought. So we are seeing a huge
    increase in the theft of mail. We are seeing mail carriers
    being assaulted so that they could steal the mail as well as
    steal the arrow keys that are there. And what this allows the
    criminals to do is actually gain access to these checks.
        And unfortunately, the marketplace today allows them access
    to tools we did not even dream of 20 years ago. They can access
    chemicals to wash these checks. They can access cardstock from
    overseas suppliers so they can print checks that look exactly
    alike. Frankly, it is a very challenging fight for us, to try
    and stop these trends unless we can start securing the mail.
        Senator Scott. So to that point, if someone can literally
    just steal the check from the mailbox what should we be doing
    to educate consumers about check fraud, that we are not doing
    right now?
        Mr. Benda. I think there are a lot of efforts underway to
    educate consumers. That is why ABA entered a partnership with
    the U.S. Postal Inspection Service. But I think people need to
    recognize that if you give someone your name, your address,
    your bank account number, and the bank routing number you are
    giving them access to your bank account, potentially. And so
    looking at other more secure forms of payment. Senator Tester
    talked about credit cards. That may not be viable all the time.
    But ACH and other forms of payments can be useful ways to
    transfer money.
        Senator Scott. Thank you. I frequently hear from bankers
    across the country about their frustration with the
    Government's handling of suspicious activity reports, or SARs,
    and the effectiveness of our anti-money laundering regime.
    Bankers spend significant resources filing SARs with FinCEN,
    which are intended to help catch criminals and prevent abuse
    within the financial system.
        But more often than not, millions of SARs are essentially
    sent into a black box where banks receive no feedback and most
    of which are never acted upon by agency personnel or law
    enforcement.
        Again Mr. Benda, you have spent most of your professional
    life working in fraud and cybersecurity. Having worked with
    both law enforcement and financial institutions do you believe
    that the current system is working efficiently?
        Mr. Benda. I think there are definitely improvements that
    could be made to the current system. I know there is
    frustration on the bank side, and I know there is frustration
    on the law enforcement side. I think better coordination
    between law enforcement and private sector, a feedback
    mechanism, so that banks understand what law enforcement is
    looking for, so it can provide them the information they need,
    but then again, law enforcement providing tips and tactics and
    trends so that banks can better protect their customers from
    fraud.
        Senator Scott. Great. As I stressed in my opening
    statement, consumer education is critically important when it
    comes to preventing or trying to reduce that sort of fraud. It
    breaks my heart, as someone will place a check in their
    mailbox, assuming they are paying a bill or sending money to a
    loved one, only to find out that a stranger has taken it.
        It seems that ABA is working around the clock to figure out
    ways to protect consumers and help institutions ensure this
    sort of fraud will not happen again. In fact, ABA has worked to
    develop a Check Fraud Claim Directory, that provides contact
    information for banks to file a check warranty breach claim
    with another financial institution.
        Can you walk us through the ins and outs of how this
    directory works, Mr. Benda, and the importance of it?
        Mr. Benda. So we know this does not solve the check fraud
    problem, but we are trying to do what we can. One of the
    challenges banks have is finding out who is the right point of
    contact to send that claim to so they can get reimbursed for
    it, so they can provide those funds back to the consumer.
        But we have taken it further than that. We had recognized
    check fraud is happening to all Americans, and we are trying to
    figure out ways that we can make filing the claims, from the
    customer perspective, easier. We are trying to get rid of
    things such as requiring notarizations or pay affidavits,
    trying to make sure that when a decision is made the customer
    is reimbursed more quickly.
        It is a challenge. It is a very complex thing to do, but we
    are working to try and make this process better for banks and
    customers alike.
        Senator Scott. Thank you.
        Chair Brown. Thank you, Senator Scott.
        Senator Menendez, of New Jersey, is recognized.
        Senator Menendez. Thank you, Mr. Chairman.
        Mobile peer-to-peer payment applications are growing more
    popular and are expected to facilitate transactions worth over
    $1 trillion this year. Unfortunately, these platforms, which
    include apps such as Venmo, Zelle, PayPal, and Cash App, are
    also rife with scammers and fraudsters seeking to steal from
    hard-working consumers. Members of this Committee, including
    the Chairman, Senator Reed, Senator Warren, and myself, have
    led letters to banks, regulators, and the apps themselves,
    urging them to adopt better user protections. And I was pleased
    to finally see some action when the CFPB, in November, proposed
    a rule establishing supervisory authority over large nonbanks
    with person-to-person payment apps, and I know Zelle has made
    some changes to its own policies.
        Ms. Sanchez-Adams, can you comment on these actions taken
    so far and tell the Committee what next steps we should
    consider to take to better protect consumers from scams and
    fraud on P2P apps.
        Ms. Sanchez-Adams. Yes. Thank you, Senator, for the
    question. The CFPB's proposed rule would allow them to
    supervise these institutions--the Cash App, the PayPal, the
    Venmo--particularly to see whether they are reimbursing
    consumers for unauthorized fraud and their policies for
    reimbursing consumers when there are fraudulently induced
    payments. So basically to check their policies and procedures
    and make sure they are complying with the law. And that is
    extremely important, and we support that rule.
        More actions we can take is to make sure that the law
    actually protects victims of fraudulently induced payments. So
    that would be amending the EFTA or allowing the CFPB, through
    rulemaking, to do so, and that is one huge step that we can
    take.
        Senator Menendez. OK. Now according to the 2017 American
    Community Survey, nearly 26 million people, which is roughly 9
    percent of the U.S. population, have limited English
    proficiency. And we know consumers who lack access to
    information are prime targets for predatory behavior.
        Can you talk about the unique vulnerabilities consumers
    with limited English proficiency face when combating scams?
        Ms. Sanchez-Adams. I mean, absolutely, you named them. The
    fact that we talked about consumer education, consumer
    disclosure, knowing products, knowing protections. Well, one,
    if you do not speak the language or read the language, how are
    you going to know that? And two, if it is buried in fine print
    or in some contract that you never see, you will not know those
    either.
        So absolutely it impacts them, and then I would say that
    there are certain payment systems that target low-income
    consumers and minorities because they are pushed out of the
    banking system. So they are targeting these folks and they are
    more rife with fraud, and so they really need to be doing more
    to protect these consumers.
        Senator Menendez. In addition to being disproportionally
    targeted by a wider variety of scams, Limited English
    Proficiency (LEP) consumers can also face difficulties in
    accessing anti-scam and fraud resources. For instance, there is
    no CFPB online complaint system in Spanish, or for that fact,
    in any other language. And IC3, the FBI's website that provides
    education resources to protect individuals from cybercrimes and
    allows victims to report internet crimes is only available in
    English.
        Would making more anti-fraud and scam resources available
    in other languages help protect LEP consumers?
        Ms. Sanchez-Adams. Yes, absolutely.
        Senator Menendez. Yes. Talking about different groups of
    consumers, Mr. Breyault, another group often targeted by
    scammers are seniors. Crimes targeting older Americans were up
    84 percent in 2022 over the previous year, and furthermore,
    older adults report higher median losses than younger adults.
        According to the Federal Trade Commission, the median loss
    from fraud was $1,750 for those 80-years old or order, compared
    to $548 for those in the 20 to 29 age group. These losses can
    have significant impact on the financial security of older
    Americans as they rely on these critical funds for their
    retirement.
        What sort of procedures or training should financial
    institutions be implementing to improve the institutions'
    abilities to detect and prevent fraud committed against
    seniors?
        Mr. Breyault. Thank you for the question, Senator. So
    seniors are uniquely vulnerable to fraud. They are inviting
    targets for scammers because they often have access to more
    assets that the scammers can steal because they have been
    working for their entire lifetime. Unfortunately, they also
    have less ability to recover. They do not have as much time to
    go back to work and recover these lost funds. So they do
    present uniquely vulnerable type of victim.
        In terms of what institutions can do, number one, I would
    say is make sure that you are training all of your employees to
    understand that fraud victims are not the ones who are at
    fault. Too often we have a stigma against older Americans who
    report this. We wonder, how can you be so stupid? You know, you
    fell for this. You know, didn't you know better? As was
    mentioned earlier, those are not terms we use for victims of
    violent crime, and I do not think we should use it for older
    Americans, or frankly, any scam victim.
        So I think training of frontline employees to show some
    grace when they get these kinds of questions is important. I
    think also we need to be able to provide anti-fraud services to
    people in ways that do not involve technology. Unfortunately,
    many older Americans often have difficulty using advanced
    technology. They actually want a real person to speak with.
    They want somebody in a bank branch they can go and talk to
    about that. And those avenues are often more difficult or more
    costly for all consumers but particularly older Americans to
    access.
        So certainly if there are policies that could make that
    avenue of getting fraud redressed easier for older Americans is
    another step I would encourage you to take.
        Senator Menendez. Thank you. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Menendez.
        Senator Tillis, of North Carolina, is recognized.
        Senator Tillis. Thank you, Mr. Chair. Thank you all for
    being here.
        Mr. Benda, you mentioned the need for a partnership. Give
    me just a quick back-of-the-napkin list of people who should be
    at the table, particularly the ones who should be that are not
    right now.
        Mr. Benda. Thank you, Senator. I think right now there
    really is no table, and so it is hard to say who is there or
    who is not. There is not that coordination that we would like.
    I think the appropriations language that is in there, having
    Treasury look at who could convene the right people, makes a
    lot of sense.
        Senator Tillis. Yes, if I were just kind of spitballing,
    obviously banks, credit companies, payment platforms, like
    Senator Menendez put together, consumer advocacy groups, law
    enforcement, but really the whole of Government, too.
        Mr. Benda. Yes, absolutely.
        Senator Tillis. And one partner that I am kind of wondering
    whether or not they are already taking steps in the wrong
    direction would be the CFPB. Last year, in August, I think it
    was August of last year, Director Chopra mentioned that it may
    be more difficult to get credit header data. We are going to go
    from maybe minutes for law enforcement getting it to a subpoena
    process. Is that like a partnership that is actually going to
    put us further away from a viable solution?
        Mr. Benda. That is not the direction we would like to see
    them go, Senator.
        Senator Tillis. You are very diplomatic. It would just seem
    to me when you are taking that law enforcement tool off the
    table, at the end of the day law enforcement has to be at the
    table. We have to enable them. In fact, we need to take a look
    at increased penalties.
        I, for one, think that is taking a step in the wrong
    direction, so I understand the motivations on some part. I
    disagree with most of Mr. Chopra's motivations, to be honest
    with you, in this case. I think it is cross purposes to the
    problem we are trying to address today.
        Ms. Sanchez-Adams, I really struggle with this, because you
    hear Senator Tester had two hoverboards charged to his account.
    I had my bank call me up and ask me if I had charged $100 at a
    hardware store in Chicago. I have not been to Chicago in almost
    10 years, certainly not a hardware store, so we said no and it
    was covered. That was clear fraud. The banks covered it. I want
    to come back on a question related to this to you, Mr. Benda.
        But how do we kind of strike the balance? We had a hearing
    yesterday about social media platforms, and we had some
    horrible stories told about the children that had lost their
    lives, suicides, a number of other things. But at the end of
    the day, there is a parental responsibility there. These
    devices that we are giving children, these tablets, phones,
    that we have to be very careful with how they are used.
        Similarly, I do not believe that you can just hold the
    payment platforms or the banks or the intermediaries
    responsible for all fraud, and I know you said it will not work
    just with financial literacy or education. I agree with that.
    But at some point, I mean, do you agree that at some point, if
    we are striking the right balance, that the consumer has to own
    some level of responsibility? And I say that with some
    trepidation because I have heard these stories of people being
    scammed into keeping on the line, and going to a Walgreens and
    getting a $500 payment to somebody that they think is an IRS
    agent. I get all that. But at some point we cannot possibly
    build into the system someone other than that individual who is
    making that horrible decision.
        So how do you strike the balance in a partnership to
    address a problem that I think we all need to address?
        Ms. Sanchez-Adams. Yes. As I mentioned, the U.K. example.
    Initially they had an industry-led response. It was called the
    Contingent Reimbursement Model, and there they would, again,
    apportion the responsibility between three parties--the
    consumer who was victimized, the receiving institution, and the
    consumer's institution. And so the consumer would be on the
    hook for like the first 10 pounds or so, and they would be
    reimbursed up to a certain amount.
        So there are different ways we can do that. If we change
    the law to allow, again, the receiving institution to bear some
    responsibility, not just the consumer's institution, then you
    can build other types of protections like only allow a certain
    amount of dollar transactions per day because you are going to
    be bearing that responsibility, or verifying that your new
    customer, who is receiving all of these new transactions, is
    not committing fraud. So there are different things that I
    think we can do.
        Senator Tillis. Well, the reason I worry about, you know,
    we cannot let people off the hook, even if it is devastating
    consequences. The reason I worry about that is that the
    industry that will serve customers will then have to start
    thinking about who they serve, based on a potential risk.
        Ms. Sanchez-Adams. Absolutely.
        Senator Tillis. We have already said that the vast majority
    of the money comes from senior citizens. The vast majority of
    the fraud are individual interactions coming from young people.
    Then I could see a financial institution saying their sweet
    spot is not them.
        Ms. Sanchez-Adams. Right.
        Senator Tillis. But when I am talking about a partnership,
    that is what I am saying. Let's not throw a baby out with the
    bathwater and unbank. There are a number of times, we are
    proposing legislation up here that on the surface looks good,
    but it ultimately underbanks or unbanks people. So we have just
    got to strike the right balance.
        Ms. Sanchez-Adams. Absolutely. I mean, with credit cards,
    consumers are already responsible for like up to $50 of
    unauthorized transactions, and you are right that people who
    can get credit is limited because of that credit risk. So all
    of those balances can be struck, but if people are more
    protected then they are more apt to feel safe and to actually
    choose to bank.
        Senator Tillis. Well, I have gone over my time, but Mr.
    Chair, just food for thought because of what Mr. Benda said,
    and I am sorry I was not able to get to the third witness. But
    the fact that we need a partnership but we do not really have a
    convener now, I do not think we have done it in this Committee,
    Mr. Chair, but it may be helpful outside of a formal Committee
    hearing to have a workgroup and get all the players, and let's
    see who is absent, who we think are a necessary part of the
    team. But maybe to host a workgroup at some point in the future
    so that we can get out there, in a less formal setting, and say
    how do we initiate this, and ultimately get a response from law
    enforcement and all the other stakeholders. That is something I
    would love to participate in.
        Chair Brown. Thank you for that thought, Senator Tillis.
        Senator Smith, from Minnesota, is recognized from her
    office, I believe.
        Senator Smith. Thank you, Mr. Chair, and everybody, thanks
    to our panelists, and I am sorry I cannot be with you in person
    today.
        I really appreciate this hearing, Mr. Chair, and I think
    what I am gleaning from what everyone is saying is just how
    ubiquitous these scams are across the country, and I know it is
    true in Minnesota.
        But I want to ask about particularly this question of
    spoofing, and Mr. Breyault, I will address this question to
    you. You know, scammers have been spoofing phone numbers of
    banks and other financial institutions for years, but it feels
    like they are refining their contacts. I am sure it has
    something to do with how AI can be deployed. And it can leave
    even the savviest consumer susceptible to being victimized by
    this. My own dad, who is nearly 94 but totally on top of it in
    so many ways, had this happen to him and was well down the path
    of providing lots of information about his bank because he
    thought he was talking to the bank. And luckily he was able to
    stop it in time, but it created quite a ruckus.
        So, Mr. Breyault, I am wondering about whether telecom
    companies should have some responsibility for preventing
    spoofing, and also how banks and telecoms can work together to
    ensure that scammers are not so easily able to impersonate a
    legitimate call or a legitimate institution.
        Mr. Breyault. Thank you for the question, Senator.
    Certainly we need a multifaceted solution to this problem, and
    how scammers contact their victims is certainly one of the
    channels that needs to be addressed. Spoofing, as you
    mentioned, has for a long time been a tactic that scammers have
    used to impersonate not just banks but Government agencies,
    like the IRS. We know that they use spoofing to impersonate
    agencies like Immigration, when they reach out to particularly
    vulnerable, limited English proficiency communities.
        And so more definitely needs to be done. The telecoms
    certainly have a role to play in this. Mr. Benda mentioned
    better information-sharing between the telecoms and the banks
    on this. I think that is a great idea. And to the extent that
    that is not happening I think it is a role for this Committee
    to play in making sure that that cooperation does happen.
        Beyond simply spoofing, I think we need to look at the
    epidemic of texting and how text messages are being misused to
    impersonate not just banks but like Government agencies. We
    hear a lot about scammers impersonating retail, like Amazon or
    UPS telling you about package delivery.
        So definitely going after the channels that scammers use to
    reach their victims and making those safer is an appropriate
    thing to do, and I think would have an impact.
        Senator Smith. Thank you. Thanks very much.
        I would like to just quickly talk about an issue that is
    quite related, I think, to this topic today, which is how
    businesses and other institutions are targeting shady practices
    at home buyers and homeowners. Ms. Sanchez-Adams, I would like
    you to answer this question.
        One of the things that has been happening in Minnesota, and
    I think around the country, is we are seeing a proliferation of
    these very predatory contract or deed contracts where a home
    purchaser enters into a contract with a home seller to pay for
    the home in installments, thinking that they are in the process
    of buying their own home. This has been targeted specifically
    to Somali Minnesotans who, in their faith traditions, are
    discouraged from either paying or profiting from interest. So
    this is often marketed falsely as an interest-free way to buy a
    home.
        And then what happens, of course, is folks get into this
    contract and they realize that if they miss just one payment
    they end up forfeiting all of the money that they put into the
    home and losing the home. They find out, for example, that they
    have balloon payments at the end, none of the protections that
    exist with a traditional mortgage.
        So, Ms. Sanchez, could you just talk about this a bit, from
    your perspective as a consumer advocate, and what we should be
    doing a better job of here. Senator Lummis and I introduced a
    piece of legislation yesterday jut to help protect homeowners--
    help protect people from these predatory practices.
        Ms. Sanchez-Adams. Yes, thank you for the question, and
    absolutely. I was a legal services attorney for 13 years, and
    would hear of these stories all of the time. And my colleague,
    Sarah Bolling Mancini, actually testified on this very issue,
    so I would recommend you look at her testimony--she is
    absolutely the expert on this--for recommendations on what you
    can do.
        Senator Smith. Thank you. Thanks, Mr. Chair.
        Chair Brown. Thank you, Senator Smith.
        Senator Britt, from Alabama, is recognized.
        Senator Britt. Thank you, Mr. Chairman. We are fortunate to
    have a growing number of innovation and just different ideas
    coming into the financial sector, as we look to find new ways
    to make sure that we are serving existing clients, that they
    are doing that, and then also how do we reach individuals and
    families and communities that have not always had traditional
    access to different things in the financial markets. So I have
    been glad to see that innovation begin to occur.
        However, we know that bad actors are exploiting our
    financial industry only to continue to adapt to the new
    innovation that we are having and finding ways to undermine
    consumers, and
    ultimately fraudsters are targeting these individuals. They are
    targeting vulnerable Americans with phone, internet scams to
    the tune of almost $9 billion a year. And in Alabama, in 2022,
    we were actually defrauded, Alabamians, by nearly $55 million.
    And so that number is not only alarming but even worse, it
    continues to rise.
        So we must do more to protect consumers, and while thinking
    carefully about regulatory changes that would impact the
    benefits provided by banks, or P2P apps that provide fast and
    nonfee payments between friends, we have got to look at what is
    happening and figure out how we--we being Congress, industry,
    Government agencies like the CFPB--can actually get to the root
    of the problem.
        And the CFPB, they are supposed to be the agency that
    focuses on protecting consumers, but time and time again it
    seems that they are utilizing their resources, their time, and
    their energy to pursue regulations that actually only
    perpetuate the problem. For instance, I am concerned that the
    Bureau's expected changes to the Fair Credit Reporting Act
    could directly stifle banks' fraud prevention efforts.
        Mr. Benda, you mentioned this specifically in your written
    testimony, that the CFPB's proposal could create new legal,
    practical, and procedural difficulties for banks to detect and
    prevent fraud and crime. Can you elaborate a little bit more on
    that for me?
        Mr. Benda. Thank you for the question, Senator. The concern
    here is that banks routinely access this information, and they
    use that information for fraud purposes. I think the CFPB is
    targeting others that might use it for commercial purposes, but
    when you put the Fair Credit Reporting Act around that
    information, access to that type of information, it creates a
    whole series of barriers that require notifications to the
    potential criminals that banks are taking certain actions on
    their accounts.
        So for normal Americans it does not make any sense. You
    know, I would not mind being notified. But when banks have
    these requirements placed on them by FCRA for this type of
    anti-fraud information it creates notifications to criminals
    and reduces the ability, frankly, for them to share that type
    of information or use that type of information.
        Senator Britt. So what would be a better path forward on
    this, do you think?
        Mr. Benda. I think it is a complex issue. We would be happy
    to get back to you with any details on that, but we would love
    to work with you on that.
        Senator Britt. Absolutely. Well, it just seems that
    financial regulators tend to be less focused on actually
    stopping the fraud and more determined just to see the
    institution itself pay for it, and this approach, I believe, is
    not only misguided but I think it fuels criminal activity. The
    solution to preventing financial fraud is not to create
    additional hurdles for banks and law enforcement or to halt
    innovation completely through excessive and burdensome red
    tape. Rather, we have to continue to adapt ourselves.
        I think that this includes increasing consumer education
    efforts across the board. This is one of the most important
    undertakings, I think, that we could do to help get fraudsters
    out of the way and allow Americans to preserve their savings
    and small business
    accounts, among so many other things. So greater security and
    anti-fraud mechanisms do not help, though, if consumers can be
    convinced to willingly hand over their money and their login
    credentials to a fraudster.
        So just in followup on that, what are banks currently doing
    to educate, Mr. Benda, their customers about fraud and help
    them to prevent this, keep them from falling victim to what we
    are seeing occur across the country?
        Mr. Benda. The biggest effort we have is our Banks Never
    Ask That campaign. I was interested in Senator Menendez's
    comments about non-English speakers. We recently launched that
    campaign in Spanish. So we recognize we need to reach all types
    of consumers to educate them. You know, banks will never ask
    for your password, PIN, ask you to send money to yourself.
        We also have an ABA foundation that looks at elder-scam
    awareness. We create training courses for our bankers so they
    can help their customers. And we are interested in partnering
    with the Government and other public sectors to try and amplify
    these messages. We worked with other associations like the
    AARP, but we have not seen as much engagement as we would like
    to see from maybe some of the regulators.
        Senator Britt. Well, I hope that those people will step up
    to the plate so that we can help prevent the fraud and protect
    our consumers across the country. Thank you.
        Chair Brown. Thank you, Senator Britt.
        Senator Warner, from Virginia, is recognized.
        Senator Warner. Thank you, Mr. Chairman. Thank you for
    holding this hearing. And I want to jump right into it on some
    of the tech issues.
        I know some of my colleagues were mentioning the Judiciary
    Committee hearing yesterday. As someone who thinks, has felt
    for a long time that while the original intent of Section 230
    back in 1996 might have made some sense then, this has turned
    into a ``Get Out of Jail Free'' card for all the social media
    companies, and I was glad to hear Senator Graham talk about it
    yesterday, and others members.
        I have had what I thought was a fairly simply reform of
    Section 230 for a while out there called the Safe Tech Act,
    which would basically say if it is illegal in the real world,
    it ought to be illegal in the online world, and there ought to
    not be this kind of--and again, I cannot think of any other
    term other than a ``Get Out of Jail Free'' card.
        That obviously hits us in the consumer fraud area. I think
    the FTC just did a study that said that, the way I read it was
    that when you use typical contact methods--phone, email,
    whatever--fraudsters have about a 6 to 17 percent hit rate. But
    when it
    appears on a social media platform or an online ad, that fraud
    rate goes up to 61 to 63 percent. So whether it was the kind of
    gripping testimony we heard yesterday of parents who have lost
    their kids or the ability to have Americans ripped off.
        I know this may be a little out of your lanes, but have any
    of you got any thoughts on whether we ought to have a thorough
    reexamination of Section 230, even in terms of consumer
    protection? Why don't we start with you, Ms. Sanchez-Adams.
        Ms. Sanchez-Adams. Yes, thank you for the question. You
    know, I agree. As we have all talked about, there are so many
    different avenues that we need to take to address the issue of
    payment fraud. You know, as we heard earlier, holding those
    telecom companies that are allowing robocalls and robotexts to
    happen, yes. Holding social media platforms that are allowing
    these fraudsters to do the work that they are doing on that----
        Senator Warner. But if you are going to hold them
    accountable, does that not require a change in Section 230?
        Ms. Sanchez-Adams. Well, I will agree with you that, yes,
    we need to find a way to hold all players accountable, and that
    is why we also think institutions that are banking the
    fraudsters should also be held accountable. So it is a
    multipronged approach.
        Senator Warner. Mr. Benda? Mr. Breyault?
        Mr. Benda. Thank you, Senator. I am not familiar with the
    Act but I truly believe focusing on impersonation scams that
    allow people to basically con people out of money is a great
    area, and we would love to work with you on that.
        Senator Warner. Sir?
        Mr. Breyault. Senator Warner, thank you for the question.
    You know, I think as you have heard from all the witnesses
    today, we need the actors where these frauds are being
    facilitated to have more skin in the game. They need more
    incentives to invest and to protect their users, because
    ultimately it is the users who are the ones who are making them
    their money.
        Senator Warner. But again, the fact is--I am an old telecom
    guy so this is where I am a little just crazy to me. Section
    230 basically, the 1996 Telcom Act, said if you are one of
    these platforms, you have no responsibility at all for any of
    the content that appears. So the distribution model for this
    fraudster activity goes through the platforms, and if we do not
    hold them accountable, I do not think we are ever going to get
    there.
        I also know some of you touched on--I am going to get one
    more question in--on how we can do more real-time reporting. I
    am Chairman of the Intelligence Committee. We have managed to
    move forward on real-time reporting as we see threats in the
    intelligence system. We have still got a ways to go. I do
    think, in terms of internet-based fraud, real-time reporting
    has to be a component.
        But I want to move my last question to AI. One of the
    things that scares the dickens out of me on AI, some good
    things coming out of this, but the scale and speed with which
    these tools can be used, and they do not have to have a lot of
    sophistication. Senator Kennedy and I have a bipartisan bill
    that looks at could we bring FSOC to the table to look at where
    there are gaps, could we end up saying if you use these tools
    you might even have things like trouble damages, which already
    exists in the SEC world. We have been thinking about this on
    market manipulation. But we have also been thinking about it in
    terms of consumer fraud.
        And one of the things that really concerns me is a lot of
    these AI tools, you may say just go make the most money
    possible, and that may then result in screwing around with
    consumers. But it goes to the question of intent.
        My time is clicking down. Do any of you have any thoughts
    on how we get at this intent issue around AI tools?
        Mr. Breyault. So Senator Warner----
        Senator Warner. Maybe you could take it for the record.
        Mr. Breyault. Yes.
        Chair Brown. Be brief, each of you, if you would.
        Mr. Breyault. Sure. I definitely like the idea of
    increasing penalties for bad actors who use AI.
        Senator Warner. Good. Well, if you could think about the
    intent question I would love to get some thoughts on that.
        Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Warner.
        Senator Butler, from California, is recognized.
        Senator Butler. Thank you, Mr. Chairman. If it is OK I
    would love to sort of go back to the point of conversation that
    Senator Tester, actually, introduced, and this question of
    ``who''. There are a lot of perceptions that these kinds of
    scams and fraudulent activities happen mostly directed toward
    older people, and we have had a lot of conversation here about
    that. And I think it is important as we have started to uncover
    in this hearing that we paint a full picture of who actually
    are victims and how they are being impacted.
        There has been some research put forward focused on Gen Z
    and their impact here. The 2022 Annual Cybersecurity Attitudes
    and Behaviors Report shows that Gen Z and Millennials were
    actually more likely to fall victim to certain types of scams
    like phishing than other generations. The data also showed that
    Gen Z Americans were three times more likely to get caught up
    in online scams than Boomers, and the cost of falling victim to
    online scams has risen. In 2017, young victims under 20 are
    estimated to have lost $8.2 million in online scams, and that
    rose dramatically from 2017 to 2022, where that loss has now
    exceeded $210 million.
        Ms. Sanchez-Adams, I would love to just start with you on
    this question. Given that the younger generations are already
    struggling financially compared to their parents and
    grandparents, are there specific examples that you are aware of
    that are happening in the financial services sector that are
    working with schools and youth organizations to raise greater
    awareness about online scams? We have talked a great deal about
    partnership here, and what I am trying to get at are there
    actually targeted efforts focused on this younger population.
        Ms. Sanchez-Adams. None that I am aware of.
        Senator Butler. Mr. Benda, do you have any specific
    examples that you are aware of?
        Mr. Benda. ABA does run a Teach Children to Save effort,
    where we partner with bankers and we go out to different
    communities. It is financial education but also has a scam
    component.
        Senator Butler. Mr. Breyault.
        Mr. Breyault. Senator Butler, at NCL we have a program
    called LifeSmarts, which is targeted at high school students,
    and one of the parts of the curriculum at LifeSmarts is to
    teach younger consumers, particularly, those in high school,
    how to spot and avoid scams, including the ones that you just
    described.
        I would also just like to point out that while the
    numbers--you have talked about $210 million for losses. We have
    also talked about $9 billion in losses overall. I think it is
    important to stress that those numbers, by almost every
    cybersecurity expert and fraud expert that we talk to, those
    numbers are a significant undercount.
        Senator Butler. Sure.
        Mr. Breyault. We know that consumers do not report these
    scams as much as they happen. So the numbers you see here are
    bad, but the real situation is likely much worse.
        Senator Butler. I appreciate you making that point because
    that is a little bit of what I am trying to get at. Young
    people are falling victim to these crimes, and the shame and
    stigma associated with, you know, falling for them, being so
    stupid as to, as the term was used earlier, to fall for them
    does not really help us get at prevention.
        And so I just wanted to follow up. Mr. Benda, Mr. Breyault,
    you mentioned some specific programs. Is there any information
    that you could share relative to scale of those programs? How
    many high schools are you working with? You know, I have six
    million children who are residents of California. One-in-four
    American kids are residents of my State. And so I am trying to
    figure out what is the scale at which we are actually moving
    and if there are recommendations that you would have to get to
    a greater scale faster.
        Mr. Benda. Senator, that program is run by our ABA
    Foundation, and they would love to share that detail with you.
    I will make sure that we get that to you.
        Mr. Breyault. And while our program reaches tens of
    thousands of students across the country, and the content
    reaches hundreds of thousands more, with additional resources
    we can always reach more. But yes, certainly programs like
    LifeSmarts, programs like the one Mr. Benda discussed do play a
    role in helping consumers build a resistance against these
    scams. But that is not the only thing that is going to stop
    this. We need legislation that actually goes at the incentives
    that companies have to actually protect their customers from
    these scams in the first place.
        Senator Butler. Thank you. Mr. Chair, I would love to
    submit a followup question for the record with the staff. But
    thank you for the time.
        Chair Brown. Of course. Thank you, Senator Butler.
        Senator Reed, of Rhode Island, is recognized.
        Senator Reed. Thank you very much, Mr. Chairman, and I
    thank the panel for their testimony.
        Ms. Sanchez-Adams and Mr. Breyault, the Electronic Fund
    Transfer Act and its implementing rules cover transfers done
    through the ACH system, where it is not clear if a transfers
    done through wire transfer systems are covered. And I am very
    concerned that this gap or ambiguity leaves consumers
    unprotected against fraud for very large electronic payments
    they are doing for things like a downpayment on a home.
        Ms. Sanchez, first, how widespread is the issue of wire
    fraud for consumers, and can you walk us through some common
    scams?
        Ms. Sanchez-Adams. Yes. So it is unfortunately exploding. I
    get two or three emails a week about it from consumer lawyers,
    and sometimes even from consumers themselves, and there are
    always news reports on this. Some of the common scams, you have
    one that is horrible. It is a tech support scam, and they gain
    access to somebody's laptop or computer and then gain access to
    their financial information without the consumer knowing, and
    then they get onto their bank account and do a wire transfer to
    a crypto account, and then the consumer is out of luck. Even
    though State law says that consumers should not be held liable
    for unauthorized wire transfers, there are all of these
    caveats. If there was a security procedure in place, if the
    consumer agreed to it in the account agreement then generally
    the banks will say either, sorry, it was sent out and there was
    a security procedure that was used so we cannot help you, or if
    you, by chance gave your account information to someone it
    would be protected under the EFTA but not under the UCC.
        Senator Reed. And Mr. Breyault, your comments.
        Mr. Breyault. Certainly in addition to the type of scams
    that Ms. Sanchez-Adams discussed we see this where scammers get
    in between consumers during a real estate transaction. For
    example, when you are sending money to a title agent, a scammer
    may impersonate the recipient of those funds in order to
    disrupt that transaction.
        And I think certainly one of the things that all of these
    transactions have in common, whether we are talking about ACH
    or peer-to-peer, or gift card to some extent, is that the money
    is transferred very quickly, nearly instantaneously. In fact,
    that is why it is so attractive to the scammers.
        So I think as part of the solutions that you consider in
    this is do we need to slow down some of those transactions? Is
    the benefit we are getting from instantaneous payments, that
    are oftentimes irreversible, even after fraud is discovered,
    are those benefits outweighed by the cost to consumers of the
    fraud that is occurring on these systems?
        Senator Reed. Now can the Consumer Financial Protection
    Bureau deal with these issues under current law, or do we have
    to pass additional legislation to try to address these scams?
        Mr. Breyault. The CFPB does a tremendous amount of
    authority to start to address some of these scams, and they are
    exercising it. But I would say there is more that could be
    done. We discussed, particularly in my testimony, the
    Protecting Consumers from Payment Scams Act, which would
    redefine what is an unauthorized transaction to include these
    kinds of induced fraud, or also known as authorized push
    payments, as covered under EFTA. So certainly that is one area
    where the CFPB could help us, and this Committee could help the
    CFPB do its job even better.
        Senator Reed. Ms. Sanchez-Adams, your solutions?
        Ms. Sanchez-Adams. The CFPB has authority under Regulation
    E, or the EFTA, to do rulemaking. So through rulemaking they
    could clarify, you know, there was the exemption to wire
    transfer that the Federal Reserve Board said included Fed wire,
    CHIPS, and so they could change that after doing a rulemaking,
    open comment, and all of that. They can clarify things, like
    what fits under errors, because they can create additional
    errors under the EFTA, so they can do that through rulemaking.
        Senator Reed. Well, thank you very much. Thank you all for
    your testimony today. Mr. Chairman, I will yield.
        Chair Brown. Thank you, Senator Reed.
        Senator Vance, from Ohio, is recognized.
        Senator Vance. Thank you, Mr. Chair, and thanks to our
    three witnesses for being here.
        You know, I wanted to ask a series of questions to Mr.
    Benda, because this is a very important topic, fraud, how it
    affects consumers. But in particular I hear a lot about how it
    affects elderly consumers in the State of Ohio. You know, we
    spend a lot of time in Congress, I think rightfully, lauding
    innovation and advancements in technology, and they do bring a
    lot of benefits, but of course they bring a lot of risks.
        One of the things that I hear a lot about from constituents
    back home is that there are a lot of spoofing scams sort of
    deploying and employing modern technology to basically trick a
    lot of our elderly folks into giving money, very often preying
    on sort of the best sentiments, you know, a grandchild calling
    needs bail money, something like that. And, of course, it is
    not. It is very often a person who is just trying to scam them.
        And so I really worry about what this looks like and
    whether the modern technology infrastructure that we have in
    this country, while obviously it has a ton of benefits, has
    also enabled this massive amount of scam on our elderly
    Americans. It is not just anecdotal. Americans lost, in 2019,
    over $3 billion due to financial exploitation, and seniors are
    particularly targeted by a lot of this.
        So I want to ask this question, Mr. Benda. I know this is
    an issue that affects your member banks, and obviously it is
    customers. I know that you guys deal all the time with these
    scams, and you have to pick up the pieces and hopefully help
    the customer address some of the problems.
        Could you build on sort of what you guys are seeing, what
    is out there, what are the spoofing scams that are particularly
    concerning to you and what we can do from a financial and
    banking perspective to mitigate some of this stuff?
        Mr. Benda. Thank you for the question, Senator. So I think
    you are hitting the nail on the head. The FCC even put out an
    alert just last summer that talked about bank impersonation
    scams being the number one scam. Everyone probably on this dais
    has gotten that text message that says, ``Did you have this
    fraud alert? Did you make this transaction?'' and you reply to
    that because it looks exactly like something coming from your
    bank. And then they lure you in. They socially engineer you.
        And I want to be clear. These people are very good at what
    they do. They are very bad people. They are criminals. They are
    very convincing. It is not stupid people that fall for these.
        So what we would like to see happen is trying to attack
    these impersonation scams. Can we figure out a way--and you are
    right, our technology infrastructure is not where it needs to
    be to ensure that that caller ID message is accurate. If, at
    any point in that process, that authentication drops--there is
    a process the FCC has, but it can be worked around--if that
    authentication drops it should be an unknown caller. We should
    not allow people to fraudulently display wrong names. My dad is
    86. If it says his bank on that caller ID, he thinks it is his
    bank.
        So we need to stop that because they are the ones that are
    enabling those scams to occur.
        Senator Vance. And is that something that the
    telecommunications companies--maybe this is outside the
    jurisdiction of this particular Committee, though. I know a guy
    on the Commerce Committee. Is this something that our
    technology and communications infrastructure should be better
    at? I mean, recognizing it is not necessarily your area of
    expertise, what can we be doing to better police this stuff and
    preventing it from happening?
        Mr. Benda. So the FCC has active rulemaking on the
    implementation STIR/SHAKEN. We would like to see that move more
    quickly. We would like to see it more default to versus right
    now they let messages through if they meet certain things,
    basically default to you do not get to display any message
    unless you are at the gold standard level. I think that is one
    thing, a change we could make right now that would really help.
        Senator Vance. OK. Great. I will yield the remainder of my
    time, but appreciate the guests being here and appreciate the
    Chairman for hosting the Committee.
        Chair Brown. Thank you, Senator Vance.
        Senator Van Hollen, of Maryland, is recognized.
        Senator Van Hollen. Thank you, Mr. Chairman, and thank all
    of you for being here and for your testimony.
        Earlier this month the FTC released its annual report on
    consumer activities, and they reported that my State of
    Maryland is among the top five States with the highest per
    capita rates of reported fraud. And this has been an ongoing
    issue in Maryland, as around the country, and it takes all
    forms, as the conversation today has indicated. I want to
    focus, for a moment, on one area of this kind of fraud, and
    right now the failures of our system to catch it and compensate
    people for it.
        We have an open case in Maryland where the victim of check
    fraud reported the fraud right away, but their local bank,
    their home community bank, is still awaiting payment from the
    much bigger bank in which the fraudulent check was deposited.
    And I am hearing a lot from Maryland community banks about
    this, and I think their view is well expressed by a letter that
    I have here from the Community Bankers Association of Illinois,
    written about a year ago. And I am just going to quote a part
    of it:

        Our members have been particularly frustrated because these
    fraudulent returns have been deposited into accounts at the Nation's
    largest banks, and the process to determine the liability for the fraud
    losses and reimbursement is protracted. When this issue has been raised
    to Federal regulators the responses have been that it is not their
    responsibility to intervene in bank-versus-bank disputes. Our members
    respectfully urge the OCC, Federal Reserve, and the FDIC to reconsider
    your position regarding fraudulent returns in light of the information
    included in this letter.

        This is a letter that was addressed to them. They make the
    point that they are not asking Federal regulators to pick
    winners and losers. They just want to expedite this process so
    that those who have been defrauded can be made whole, and those
    who were negligent in cashing the fraudulent check will end up
    making the payment.
        If I could start with you, Ms. Sanchez-Adams, can you speak
    to this issue and whether or not, in your view, the larger
    banks are taking advantage of the weaknesses in the system to
    prevent quick payment to the local banks so that they can, in
    turn, reimburse a defrauded customer?
        Ms. Sanchez-Adams. Yes. So one story that we were contacted
    about was a man who sent a check to the IRS, and it was
    deposited into, I believe it was a Wells Fargo account, and it
    was to the U.S. Treasury. And so clearly they are not the U.S.
    Treasury. But they delayed for 2 years to refund the consumer's
    bank. Though the law says that consumers should be reimbursed
    by their own bank, that bank was dragging their heels because
    they were waiting to get payment. And the consumer bank was
    also a large bank, so it is not like they did not have the
    funds to refund the consumer.
        And I also just want to point out another problem with
    check fraud and check alteration is that it is not just them
    stealing it in the mail, but I have heard a lot of stories
    about, in particular, one that I mentioned in my written
    testimony, where they did not even have checks associated with
    their account, and fraudsters create checks out of thin air.
    And because banks do not often provide written statements
    anymore and they do not provide copies of checks back to
    consumers, it is hard for them to know that this is happening,
    or especially when it is altered to know that it was altered if
    you do not see the check to see that it was altered.
        Senator Van Hollen. I appreciate that, and we saw a big
    rise in this sort of check fraud during COVID, but it has
    continued. And obviously it impacts those who do not do online
    transactions, mostly the elderly.
        Mr. Benda, if you could talk to this issue. I mean,
    obviously you have got members of different sizes, member
    banks. But this is clearly an issue that is hurting community
    banks. Do you agree that the Federal regulators should be more
    engaged in resolving these issues?
        Mr. Benda. So, Senator, I appreciate the question. I do not
    think anyone thinks that the check fraud processing system is
    working as well as it could. Banks of all sizes agree the
    timelines to process these are taking too long, and that is why
    the industry is taking its own steps to try and figure out ways
    that we can accelerate this process, such as developing a
    universal claim form. We see sometimes banks will file a claim
    with one bank and they will have to go iterate to make sure
    they provide the required information, trying to reduce the
    information the customer is trying to provide. So trying to
    make this process easier.
        In terms of the regulator involvement in this, I agree with
    them that they do not pick winners and losers. Because each
    case is so different, it really needs to be that determination
    between the banks.
        Senator Van Hollen. Well, I understand. You know, FinCEN
    and other regulators, they do pay attention, obviously, to the
    SARs reports and sort of major fraud, but a lot of this fraud
    that is
    impacting, you know, regular people, is falling between the
    cracks, and those regular people are left holding the bag. So I
    appreciate that you, as well as--I think you, Ms. Sanchez-
    Adams, also spoke to some language that we put in the FSGG
    appropriations reporting language. I chair that subcommittee.
    It is aimed at creating more of a public-private partnership to
    really try to plug the holes and gaps in the system, and I
    understand you both agree that that would be a smart move. Is
    that right?
        Mr. Benda. Yes, Senator.
        Ms. Sanchez-Adams. Agreed.
        Senator Van Hollen. Thank you. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Van Hollen.
        Senator Warnock, from Georgia, is recognized.
        Senator Warnock. Thank you very much, Mr. Chair. Fraud is a
    serious problem in the United States, and this sector is
    growing. A Gallup study found that 8 percent of respondents
    said that they had personally been a victim of fraud in the
    past year--8 percent. In the first quarter of 2023, reports of
    financial fraud per capita occurred more often in Georgia than
    in any other State, according to data published by the Federal
    Trade Commission. Forbes Advisor ranked Georgia the fifth-most
    financially scammed State during that time period.
        With these incidents of fraud becoming more sophisticated
    and more realistic, unsuspecting folks, seniors, and others are
    being targeted directly and personally, meaning that consumer
    education plays a key role in stopping scams and fraud before
    they start.
        Ms. Sanchez-Adams, what have been some effective ways to
    educate consumers regarding the risks of financial fraud and
    scams?
        Ms. Sanchez-Adams. Well, sir, I think that financial
    education is extremely important but it does not solve the
    problem, especially because the scams change overnight. So you
    tell them about one thing and then it changes to the next day.
        So, you know, there are things that could be done, like in-
    app warnings, and I know that Mr. Benda has spoken about some
    of the things that the banks do. You can make some things in-
    app. But I think more than that you need to hold the
    institutions that are receiving those payments from the
    fraudsters more responsible for reimbursing consumers that are
    harmed.
        Senator Warnock. So in that regard, are there additional
    authorities and resources that the Federal Government needs in
    order to protect Americans from financial fraud?
        Ms. Sanchez-Adams. Yes. I mean, I think you could pass
    legislation, as I mentioned, in the EFTA to hold those
    institutions that are receiving the payments responsible, to
    have them bear some liability. The CFPB can do things through
    regulation. And certainly I agree that we should have the task
    force to get more information and more people at the table to
    talk about this and come up with solutions.
        Senator Warnock. So there is more work to be done, and our
    rulemaking and legislation has not kept pace with the reality
    on the ground. Is that a fair assessment?
        Ms. Sanchez-Adams. That is correct.
        Senator Warnock. Now, my home State of Georgia is a hub for
    financial technology and payment processing. In fact, Georgia-
    based payment processing firms handle about 70 percent of U.S.
    transactions. Many fintech and payment companies are focusing
    on activities that traditionally were handled by consumer
    banking, including digital payment apps and wallets.
        When consumers transfer money using traditional financial
    tools there are financial protection laws in place for these
    traditional tools that protect their money. But since many of
    these digital payment systems are owned by large, nonbank
    financial companies, they may not carry the same safeguards as
    financial institutions or debit and credit cards. Last
    November, the CFPB proposed a rule that would ensure that
    certain nonbank digital wallets and digital payments apps are
    subject to the same supervisory oversight as banks and credit
    unions, again, keeping pace with the reality on the ground.
        How would the CFPB's proposed rule provide additional
    protections to consumers who rely on these payment apps?
        Ms. Sanchez-Adams. They would have supervision authority,
    meaning that they can go in and examine the books. They can
    talk to them to see the policies and procedures for them
    protecting consumers from both unauthorized transactions, to
    see if they are actually reimbursing consumers, doing
    reasonable investigations, or what they are doing to protect
    fraudulently induced scams, especially things like Cash App and
    Venmo, who have access to both accounts and are seeing those
    that are receiving the fraudulent payments and where it is
    going, that they can freeze them, stop them, investigate them,
    and try to make consumers whole.
        Senator Warnock. There is no question that consumers
    deserve to know that their funds are protected by consumer
    protection laws, regardless of their payment method. We cannot
    have one set of guardrails for one sector and not have the same
    guardrails for another sector, as we see increasing digital
    operations in the banking sector or the financial sector.
        What other steps can be taken to protect consumers?
        Ms. Sanchez-Adams. So one thing is to make sure that
    consumers are reimbursed for fraudulently induced transactions,
    or scams as people talk about that. Full stop. And then hold
    those financial institutions that are receiving fraudulent
    payments responsible, and make sure that payment systems are
    doing more to protect consumers as well.
        Senator Warnock. Great. Thank you so very much.
        Ms. Sanchez-Adams. Thank you.
        Chair Brown. Thank you, Senator Warnock.
        Senator Warren, of Massachusetts, is recognized.
        Senator Warren. Thank you, Mr. Chairman, and thank you for
    holding this hearing.
        So cyber criminals are exploiting cryptocurrency to scam
    American consumers out of billions of dollars every year.
    According to the FBI, Americans are reporting losing more money
    to crypto-related investment fraud than any other kind of
    investment scam. In 2022, that amounted to reported losses of
    more than $2.5 billion, and that was up 183 percent in just 1
    year.
        Now according to the Federal Trade Commission, since 2021,
    crypto has accounted for about 1 in every 4 dollars that
    consumers report losing to fraudulent schemes, more than any
    other payment method out there.
        So let's focus today on one type of cryptocurrency--
    stablecoins. Stablecoins, like Tether and USDC, are supposedly
    pegged to the dollar or other assets that are relatively
    stable, and this is supposed to make stablecoins safer and less
    volatile than other tokens, kind of the responsible big brother
    of crypto.
        But new data show that stablecoins are now used in the
    majority of illicit crypto transactions, especially in the
    scams. Last year, more than 70 percent of the crypto scams that
    we know about involve stablecoins.
        So Ms. Sanchez-Adams, as a consumer protection expert does
    it surprise you that stablecoins are increasingly being used to
    scam customers?
        Ms. Sanchez-Adams. No. As you said, stablecoins are not as
    stable as they claim, and they really are primarily a gateway
    to support unsafe and dangerous crypto assets. So it is to get
    them into the door to do the crypto.
        Senator Warren. Right. So crypto scams, as you know, take a
    variety of different kinds of forms--pig butchering, a kind of
    romance scam, where criminals build up a personal relationship
    with their targets online and then convince them to invest
    money in fake crypto platforms before stealing the money. Many
    of these scams are perpetrated by sophisticated criminal
    organizations based in Asia, including North Korea.
        Mr. Benda, you are an expert on cybersecurity. What is it
    about crypto that makes it such a good tool to scam people out
    of their money?
        Mr. Benda. So the challenge we have is that these
    cryptocurrencies operate outside the banking system, operate
    outside of regulation, operate outside of BSA/AML.
    Additionally, the technology is there that allows you to mix
    and hide transactions. So you can go into that crypto ecosystem
    and you can actually obfuscate where that money goes after
    that. And additionally, you can put together what are called
    ``cold wallets.'' So you can download millions, hundreds of
    millions of dollars onto a single USB and transfer that
    internationally without anyone knowing anymore.
        Senator Warren. Well, that is a lot to be able to hide.
        You know, we cannot keep making it easy for criminals and
    for countries like North Korea to defraud Americans out of
    their hard-earned money. Twenty Senators, both Democrats and
    Republicans, are sponsoring the Digital Asset Anti-Money
    Laundering Act. This bill would plug the holes in our anti-
    money laundering rules to make it easier for financial
    regulators to track suspicious crypto activity, to make it more
    visible, and to shut down the scammers.
        So Mr. Breyault, your organization, the National Consumers
    League, has been protecting consumers for over 100 years. Would
    this bill help protect American consumers from crypto fraud?
        Mr. Breyault. Absolutely, yes, Senator.
        Senator Warren. Want to say a word more?
        Mr. Breyault. So cryptocurrency is certainly the next
    frontier when it comes to payment scams. It offers a scammer's
    dream--anonymity, immediacy, and irrevocability. And because of
    the availability now of cryptocurrency kiosks in convenience
    stores, grocery stores, smoke shops--I mentioned earlier that
    by one estimate there are more than 34,000 of these kiosks
    across the country--the ability to send cryptocurrency to
    scammers is usually just down the block for the vast majority
    of Americans. So yes, your bill would do much to protect
    consumers.
        Senator Warren. Well, thank you, Mr. Breyault, and thank
    you to the National Consumers League. We are very grateful to
    have your endorsement from your organization. I also want to
    say thank you to the National Consumer Law Center, Ms. Sanchez-
    Adams.
        Our bill will help protect consumers and protect our
    national security, and I look forward to working with my
    colleagues on this Committee so that we can get it passed.
    Thank you. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Warren.
        Senator Fetterman, from Pennsylvania, is recognized.
        Senator Fetterman. Well, thank you. I hate to have to
    follow my colleague, Senator Warren, and talk about crypto
    because she is, of course, the expert on that. But here into
    it.
        Now it turns out that scammers, hackers, and terrorists now
    have chosen to use crypto. I mean, it is a shock, right? And it
    makes you wonder why that. Now do you think the terrorists and
    those folks are using crypto for the airlines' mileage points,
    or is it because it is untraceable and they are engaging in
    illegal kinds of things? Is that a fair statement?
        Mr. Breyault. Yes, Senator.
        Senator Fetterman. So now, of course, we have the bank
    meltdowns and crypto funding from Hamas, and now we have
    scammers and hackers using crypto to steal people's money, of
    course, as will too.
        Now again, directly, Mr. Breyault, can you speak to how
    people have now fallen prey to these kinds of crypto scams? And
    my real question is, now is that redundant to have the term of
    ``crypto scam''? Crypto is one gigantic scam, really, on that.
    So, Mr. Breyault.
        Mr. Breyault. Yes, I would say that crypto is the next
    payment method of choice for scammers. They recognize that your
    average everyday consumers is probably not familiar with how it
    works, and yet, as I just mentioned to Senator Warren, the
    ability to give your cash to buy crypto and send it to a
    scammer is usually as close as your closest grocery store.
        Cryptocurrency, we believe, for people who want to use it,
    it is a sophisticated investor who should be looking at
    cryptocurrency, not my grandmother. And scammers prey on that.
    They prey on the fact that consumers are not familiar with how
    it works, and they use that to defraud them out of billions of
    dollars, and growing.
        Senator Fetterman. Well, and investor--and again, to me
    that is kind of a paradox, too, crypto investors. Because
    really, I know somebody once said that they would not buy up
    every cryptocurrency for I think it was a quarter. And, you
    know, really, so why would you invest in crypto for a quarter
    unless you could sell all of it for 50 cents? You know, kind of
    like the greater fool kind of thing. Is that really what
    underpins it, or is there any kind of inherent value on that,
    that really, why does it seem to be so open to scams? Is there
    a connection?
        Mr. Breyault. Well, Senator, thank you for the question.
    Personally, I would never invest in crypto, for all the reasons
    that you just discussed. But for scammers it is incredibly
    appealing because it offers what they are after, which is the
    ability to get their funds quickly, anonymously, and in a way
    that is practically impossible to reverse, even when the----
        Senator Fetterman. Anonymously. Anonymously, right?
        Mr. Breyault. Yes.
        Senator Fetterman. So it is untraceable and anonymous.
        Ms. Sanchez-Adams. If I may, one of the things that, when
    we are talking about crypto and scams, is to take into
    consideration how the money is actually going into crypto
    first. We hear a lot of stories that it is actually
    unauthorized or even fraudulently induced through wire
    transfer, and then there are no protections for the consumer
    there. If it was sent through, like an electronic funds
    transfer that is covered by the EFTA, they would have
    protections, but we have heard of it coming either from HELOC
    accounts or from wire transfers. And so initially, even that
    transfer out has no protections for the consumer.
        Senator Fetterman. Oh my gosh. That is amazing, because I
    literally was going to pivot to you for the next question, and
    that is really about that. My staff is much smarter than I am,
    and I was not really aware of this, but they brought it to my
    attention, is that true bank customers, they aren't protected
    from hackers if they initiate a wire transfer. Right. I mean,
    like that is outrageous. I did not even know that myself.
        And is there a fix for that or anything that you would
    recommend, because again, if I was not aware of that, and I am
    on the Banking Committee, so think of the millions of Americans
    that are not aware of this.
        Ms. Sanchez-Adams. Yes, absolutely. We get interviewed all
    the time, even by ``Good Morning America'', about this very
    same question. So yes, make it be covered by the Electronic
    Funds Transfer Act.
        There was an exclusion when it was originally written in
    the 1970s and wire transfers were really business-to-business
    and consumers were not doing it, and it was in person. Now you
    are doing it online through mobile and digital applications,
    and so it is, in essence, an electronic funds transfer now. And
    even the New York AGs have argued, in a suit they filed against
    Citi, that it actually is an electronic funds transfer when it
    is unauthorized or requested from someone who is not the
    consumer to send it somewhere else.
        So it can be included in the EFTA, and of course, we should
    not forget the fraudulently induced transactions. Those should
    also be included in the EFTA.
        Senator Fetterman. So I guess you are saying, so really the
    banks, I mean, they are the experts and they are professionals,
    they should be held accountable, not then a customer, that may
    not have any kind of idea on the level of what is going on. Is
    that a fair statement again?
        Ms. Sanchez-Adams. Right. Again, if it was unauthorized and
    the consumer did not do it, then yes, they should be
    reimbursed.
        Senator Fetterman. OK. Mr. Chairman.
        Chair Brown. Thank you, Senator Fetterman, for your
    incisive questions.
        It is my turn. I think I will be the last questioner.
        Ms. Sanchez-Adams, like an hour ago, an hour-and-a-half
    ago, you gave your six recommendations. The CFPB, as you know,
    last year proposed a rule that would allow the consumer agency
    to supervise larger payment apps. Just walk through, if you
    would, what this proposed rule means for large payment apps
    like Venmo and Cash App and Zelle and the consumers, what it
    means to the consumers who use these platforms. Sort of give us
    a synopsis of what this rule is actually going to mean for sort
    of all the players.
        Ms. Sanchez-Adams. One thing is that nobody actually knew
    what was happening on these platforms until this Committee sent
    a letter, right, asking for that information of how many people
    are actually getting reimbursed for unauthorized transactions
    and how many people are not being reimbursed when they are
    scammed. Nobody had access to that information because they
    were not supervised. So the CFPB being able to go in and
    supervise that means that you will actually know if they are
    following the law.
        So unless you are a private attorney who is suing them
    because a consumer came and told you a story, there was really
    no way to know what was happening behind the scenes. So that is
    why this rule is so important, and again, it is not just Venmo,
    PayPal, and Cash App, but it is other players as well.
        Chair Brown. Thank you. And, I mean, that really is the
    work this Committee can do. We do oversight. We sometimes just
    inform the public and can ask questions like that. And the
    larger participant rule, as you point out, will allow the
    agency to supervise these apps, ensuring that they follow
    consumer protection laws, and why we need a strong, independent
    CFPB. That has been said many, many, many times from this dais,
    from a whole bunch of my colleagues.
        I would also point out that this attendance--attendance is
    sometimes spotty in this Committee, sometimes not--this is such
    an important issue to so many that at least on our side of the
    aisle all but one Member showed up and a number of Members on
    the other side, too, and that is a good sign.
        Ms. Sanchez-Adams, you discussed the differences between
    unauthorized transactions and fraudulently induced
    transactions, with the major difference being that financial
    institutions are legally required to reimburse consumers for
    the unauthorized transactions. Does the same hold true for
    unauthorized transactions using wire fraud? Are consumers and
    their money really protected from scammers there?
        Ms. Sanchez-Adams. No. As I had mentioned in detail and, I
    think, in my written testimony is the Uniform Commercial Code
    (UCC) is the State law that applies to wire transfers,
    excluding international remittances. And it was not designed to
    be a consumer protection statute. It was designed for banks to
    know the procedures when using these.
        And so right now it essentially says if there was a
    security procedure that the consumer and the bank agreed to,
    and the consumer does not really agree to it when it is in the
    fine print of something they are clicking to agree to be able
    to have an account, or often those terms say that we may choose
    one. We may call you or we may not call you. So if the banks
    use that procedure then they argue that they do not have any
    liability, and it is pushed onto the consumer. This is why we
    really need wires to be covered by the EFTA.
        Chair Brown. Thank you. Mr. Breyault, we are hearing more
    and more anecdotes about how scammers are using AI to create
    personalized attack. For example, scammers, as you know, can
    use a consumer's voice from a social media post and use AI to
    replicate that consumer's voice to gain access to account
    information. How do Congress and regulators get ahead of these
    problems?
        Mr. Breyault. Thank you for the question, Mr. Chairman. I
    certainly think that AI has the potential to be as big an
    accelerant of fraud as the internet was 30 years ago. And in
    addition to the voice-cloning technology that you talked about,
    we are also very concerned that AI can be used by criminal
    scammers to basically supercharge the ability to identify the
    most vulnerable consumer. So we know that criminal gangs will
    fight over lists of potential victims in the United States that
    they want to use for many different kinds of scams. With AI,
    they can target, with laser-like precision, the consumers that
    they think are most vulnerable to these scams. So even if they
    do not need to use voice cloning, just being able to know the
    right people to contact, how to contact them, and the types of
    words to use to get them on the hook for these frauds is one
    way that we are really concerned about how AI is going to be
    used.
        I think we are still developing sort of specific policy
    proposals that Congress could take, but I appreciate what we
    heard earlier about triple damages, again, scammers using AI in
    this way. I think that is one area that this Committee should
    consider, and we are happy to get back to you with additional
    policy proposals for how to start to tackle the threat that AI
    poses.
        Chair Brown. That would be helpful. Thank you.
        Last question, and be as brief as you can. I am over my
    time. But this is the end, so that is fine.
        Mr. Benda, my colleagues and I wrote to your organization,
    the ABA, expressing concerns about the alarming increase in
    check fraud scams. Your organization created an information
    directory, providing contact information for banks to resolve
    check fraud claims. That is good as far as it went.
        Has this directory improved the timeliness with which
    defrauded customers get their money back? It seems that bank
    customers are all too often waiting too long for their money,
    not something that people often could afford when it is
    thousands of dollars. So assure me that it is more timely than
    that and that you are working to make it even more timely.
        Mr. Benda. Thank you, Mr. Chairman, and I appreciate you
    recognizing the efforts we have made on this.
        So the directory now encompasses almost 1,700 banks, and we
    have heard from many banks at how much better it has made their
    lives because they can actually file these claims faster. Are
    we where we want to be? No, we are not, and that is why we are
    continuing our efforts, reaching out to banks to try and
    expedite those processes, make sure they are more streamlined,
    make sure that we have better and more industry baseline in
    terms of the requirements to submit these claims so they can be
    processed faster.
        Chair Brown. OK. Someone from the Richmond Fed told me
    once, ``Watch us and make sure you let us know that we are
    watching you.'' So we are in this case, so thank you.
        Thanks to the three of you. Really good hearing. Really
    informative. Great interest from this Committee.
        Senators who wish to submit questions for the hearing
    record, we have notified them they are due 1 week from today,
    the 8th of February. To the witnesses, please submit responses
    to any and all of those questions within 45 days from the day
    we get them to you.
        Thank you very much. The hearing is adjourned.
        [Whereupon, at 11:57 a.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIR SHERROD BROWN
        When consumers send money through an app or send a check in the
    mail, they are supposed to be able to trust that financial companies
    are protecting their money and will help them if something goes wrong.
        Yet that's not what we see.
        Scammers and fraudsters have ramped up their efforts to take
    people's money. Banks and payment apps have stood on the sidelines
    while the problem has only gotten worse.
        Pretty much everyone has either been scammed, or knows someone who
    has been scammed, when trying to use a financial service.
        Today one of the most popular ways people send money is through so-
    called peer-to-peer apps like PayPal, Venmo, Cash App, and Zelle.
        These apps are now part of most Americans' day-to-day lives.
    Seventy-five percent of adults have used at least one of them. Forty
    percent of Americans report using them at least once a month.
        Where consumers see convenience and accessibility, scammers see an
    opportunity.
        In 2022, one major payment app had more than $100 million in
    ``unauthorized transactions.'' Another had almost $60 million.
        Of course, it's not just new technology or payment methods that
    scammers target. Check fraud is as old as our banking system.
        They'll steal a check from the mail, use chemicals to wash off the
    key details, then fill it in with the details they want and deposit it.
        You might think that more people using apps would make checks less
    of a target, but it's the opposite--check fraud is getting worse, too.
        Last year, the Financial Crimes Enforcement Network noticed a rise
    in check fraud so drastic that they issued a public alert.
        My colleagues and I wrote to the American Bankers Association
    expressing our concerns on the issue, and they created an information
    directory providing contact information for banks to resolve check
    fraud claims.
        By the end of 2022, depository institutions had reported more than
    500,000 incidents of check fraud--more than double the year before.
    Scammers broke their record again in 2023.
        The same goes for wire transfers. Scammers target wire transfers
    because they can steal a larger portion of consumers' savings through
    wire transfers.
        Americans will often use wire transfers when they want to send
    large amounts of money, like when buying a house.
        Imagine a family in the process of trying to buy a home, juggling
    all the details of the process, along with the excitement of reaching a
    major life milestone.
        On top of everything else they have to worry about, they have to
    defend against scammers posing as a real estate agent or title company
    targeting the family's downpayment.
        In 2023, consumers lost at least $270 million to wire fraud.
        And now we're faced with the possibility that artificial
    intelligence will make these problems worse.
        As just one example, scammers can now use AI to clone a person's
    voice to bypass voice authentication procedures.
        Banks, payment apps, and other financial institutions are not doing
    nearly enough to prepare for the threat AI poses in increasing the
    scale and impact of scams.
        All of these problems with scams are rampant.
        In Dublin, Ohio, a retired FBI agent, wrote a check for less than
    $200.
        Someone stole that check from a mailbox right in front of a post
    office, changed the number to $8,590 and cashed in.
        In another case, a 17-year-old student in Ohio received an
    acceptance letter from her dream college.
        Someone posing as another admitted student reached out and scammed
    her out of almost $3,000 of her own money through Zelle.
        That $3,000 was three-quarters of her college money she saved up
    working at a discount drugstore.
        None of this mattered to the bank. As far as the bank was
    concerned, this young woman was responsible for the money and
    additional fees for depositing bad checks.
        In the end, she got her money back, but only after the efforts of
    her tenacious mother, who tracked down the local executive of the bank.
        No one should have to go to those lengths because banks, payment
    apps, and other financial institutions can't get their act together to
    protect their customers.
        When these incidents happen, people lose their hard-earned money.
        And they're often made to feel ashamed and embarrassed.
        No one ever tells a victim of a hold-up that they were stupid or
    should have known better than to be robbed. But that's exactly what
    consumers who are scammed hear.
        Let's be clear, being scammed has nothing to do with intelligence,
    savviness, or education.
        Just last year, a retired White House scientist was scammed out of
    $655,000 of her retirement savings.
        Those scammers were organized. They sent her a pop-up message on
    her computer, rerouted a phone call she meant for her bank, and kept
    her on the phone for days on end.
        She still wonders about what she could have done differently. But
    no one should have to think about that question.
        And to be clear: the answer to these types of stories isn't to warn
    people to be better prepared or put millions of consumers through a so-
    called ``financial education'' course.
        Americans do not have time for that. They have jobs and kids and
    bills to worry about. It's not on them--it's on the companies. People
    should be able to have an expectation their money is safe when they
    have a reputable bank.
        People lose their money because payment apps and banks don't put
    enough measures in place to protect their customers.
        For example, among the peer-to-peer companies, Cash App refunded
    just 16 percent of unauthorized transactions in 2022.
        Zelle claims they reimburse consumers who have been victims of
    imposter scams. But their website states that since the consumer,
    ``authorized the payment, you may not be able to get your money back.''
    It is unclear whether Zelle will actually reimburse victims of imposter
    scams. They need to clarify their reimbursement policy.
        These companies need to step up, and they apparently need rules to
    make them do it. These banks, payment apps, and other financial
    services companies have shown us they need, shall we say,
    encouragement.
        The Consumer Financial Protection Bureau has a proposed rule that
    is one strong first step. It would help ensure that companies like
    Venmo, Cash App, and Zelle follow Federal consumer protection laws.
        This is what the CFPB does--protect consumers and their hard-earned
    money. When the CFPB is empowered, it ensures that the financial system
    works for consumers, not just corporations.
        With millions of users, it only makes sense that these companies do
    more to protect consumers' money.
        Because, as we've seen in previous hearings, frauds and scams are
    not unique in consumer finance, they are also common within
    cryptocurrency. We will keep pushing to make our financial system
    safer--whether its stopping rampant frauds and scams in cryptocurrency
    or in apps and check fraud.
        I hope we can discuss more today about how banks, payment apps and
    other financial service companies can step up for their consumers and
    earn their trust back.
                                     ______

                    PREPARED STATEMENT OF SENATOR TIM SCOTT
        I'll start off by saying, I guess Steven Spielberg was on to
    something when he named the movie ``Catch Me If You Can''.
        Recently, I saw a movie called ``The Beekeeper'', which starts off
    about financial scams that led to the grandmother's suicide. Now
    financial scams may not today lead to suicide, but without any
    question, they certainly kill your hopes, your dreams, and your sense
    of financial security.
        The impact of financial scams--especially on our senior citizens--
    is undeniable. Having been the Ranking Member on the Aging Committee,
    we've had many, many hearings about the devastation of retirement
    savings lost. Lives changed. Grandmothers looking for a place to call
    home--moving back in with their kids or their grandkids.
        The devastation is so real--and so often--goes unreported in some
    instances. And certainly, the investigations leave many wanting.
        Even in a largely digital age, more traditional forms of fraud
    continue to flourish.
        We think about the fact that whether it's check fraud, wire fraud,
    or mail fraud, we've seen a resurgence of criminal activity in these
    spaces--in addition to of course the new types of fraud that comes
    along with the technological advancements that we've seen around our
    country--and certainly the innovations around the world.
        Not only do I think of my own mother--who celebrates a birthday
    this weekend as a senior citizen--I think of every single South
    Carolinian who trusts that their money is safe when they write a check
    and place it in the mail, or transfer money to their grandkids.
        Mr. Benda, I thank you for bringing your expertise and talking
    about the different kinds of fraud that can impact American consumers.
        Protecting consumers and preventing fraud are critical pillars of
    our financial system and, frankly, what our society deserves.
        For many families, becoming a victim to these scams is equivalent
    to wiping out a lifetime of savings.
        And not just the dollars in the account, but the thought that you
    are no longer safe to transact business anywhere, in any form.
        For many, it is the worry that their identity is compromised, that
    their credit score is impacted, and they struggle to realize just how
    will they survive and afford--whether it's their rent, or mortgage, or
    even simply groceries.
        Which in today's inflationary economy is even harder than it was
    before.
        Speaking of dollars, let's just count the costs--$9 billion in 2022
    is the cost of financial fraud. A staggering number.
        Unfortunately, these criminal acts of fraud and theft are not new,
    and criminals like these continue to prey on the vulnerable.
        This is precisely why our financial institutions and financial
    industry participants should--and do--spend billions of dollars
    developing and implementing innovative technologies to strengthen
    security that will protect families and businesses from fraud.
        But on the other side of the coin, we haven't seen the same
    commitment from our Federal regulators.
        Recently, our regulators seem to be more focused on political
    grandstanding than promoting innovative solutions, protecting
    consumers, and increasing efforts that support financial education.
        And instead of focusing on real crimes and holding criminals
    responsible, this Administration seems intent on tying up financial
    institutions with ever increasing amounts of Washington red tape.
        Recently, the CFPB has continued its deceptively named ``junk fee''
    campaign, targeting legitimate, contractually agreed upon payment
    incentives.
        In its latest proposals, the CFPB uses legal gymnastics to turn
    penalty fees into loans while slapping the label ``abusive'' on any
    practice it just doesn't like.
        The CFPB is sending a clear message: it is willing to stretch the
    law beyond its limits to suit Director Chopra's political agenda.
        And every dollar spent navigating Washington red tape is a dollar
    less on initiatives that actually help families and protect businesses.
        It's a dollar less for bolstering a firm's cyber defenses in the
    investment world that may prevent or even catch fraud before it
    happens.
        Unfounded, bureaucratic regulations take resources away from
    financial innovation and education, both of which can help lift up the
    underserved and minority communities.
        What concerns me even more than all of this, is recent allegations
    that suggest that Federal law enforcement and financial regulators may
    be expending their resources to target Americans for their political
    and religious beliefs.
        Instead of targeting Americans for purchasing Bibles or shopping at
    the Bass Pro Shops, our Government should focus on doing its job--
    protecting our families and prosecuting actual criminals, including
    those behind financial scams.
        Unfortunately, these examples are part of a larger trend we have
    seen from this Administration of putting politics first.
        For example, banking regulators were so focused on climate change,
    that they failed to identify the key risk factors leading to the
    second, third, and fourth largest bank failures in our Nation's history
    last spring.
        And again, if the CFPB wasn't so focused on building a public
    pressure campaign against so-called ``junk fees,'' maybe it could do
    its job and actually protect consumers from the real harm that comes
    from being a victim of financial crime.
        One of the best tools any of us have to fight back against
    financial crimes is to become better educated, both about the financial
    products and protections that are available to us and about the scams
    and methods criminals are using against us.
        In fact, I have long championed the idea that financial education
    and financial literacy is one of the most important and most critical
    tools for climbing the ladder of success in America.
        It's why I've worked so hard to incorporate financial literacy in
    my work here on this Committee, and financial literacy is a core pillar
    of two of my initiatives--both the ROAD to Housing and Capital Markets
    framework.
        And I was so proud to work across the aisle with Senator Reed last
    spring to pass a resolution declaring April financial literacy month.
        As we discuss the very real issues of financial fraud and crime, we
    must take a holistic approach.
        Our financial institutions must do their part to protect, to serve,
    and educate customers.
        And our regulators must do their job and implement the law Congress
    enacted, not their political wish list.
        We must all work together to gain a better understanding of the
    options before us so that we are able to best serve our communities,
    our constituents, and our Nation.
        I look forward to hearing from each of the three witnesses.
                   PREPARED STATEMENT OF CARLA SANCHEZ-ADAMS
                 Senior Attorney, National Consumer Law Center
                                February 1, 2024
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                        PREPARED STATEMENT OF PAUL BENDA
       Executive Vice President, Risk, Fraud and Cybersecurity, American
                              Bankers Association
                                February 1, 2024
        Chairman Brown, Ranking Member Scott, and Members of the Committee,
    thank you for the opportunity to testify today for a hearing
    ``Examining Scams and Fraud in the Banking System and Their Impact on
    Consumers''. My name is Paul Benda, and I serve as Executive Vice
    President, Risk, Fraud and Cybersecurity for the American Bankers
    Association (ABA). The American Bankers Association is the voice of the
    Nation's $23.4 trillion banking industry, which is composed of small,
    regional, and large banks that together employ approximately 2.1
    million people, safeguard $18.6 trillion in deposits, and extend $12.3
    trillion in loans. Our members know that fraud takes a financial and
    emotional toll on their customers and banks of all sizes are making
    extraordinary efforts to protect and safeguard customer accounts as
    fraud has become more sophisticated.
    Introduction
        From using breakthrough technologies such as generative artificial
    intelligence (AI) to old fashioned theft of checks out of mailboxes,
    criminals are relentlessly pursuing new ways to scam consumers and
    small businesses and steal money from their bank accounts. Banks have a
    long history of improving and innovating to protect their customers--
    from the adoption of chip-enabled credit cards to multifactor
    authentication to protect user accounts to the use of advanced AI tools
    to warn customers about potentially fraudulent transactions--banks have
    been on the front lines of innovation and deploying advanced
    capabilities to protect their customers. Unfortunately, however, the
    fight against these criminals is one that banks cannot win on their
    own.
        A recent example of widespread fraud efforts occurred when
    criminals took advantage of the economic devastation of COVID-19 and
    the unprecedented Government response to support small businesses and
    out-of-work Americans. By the Government's own estimate over $300B \1\
    \2\ was lost, fueling the growth of more organized and sophisticated
    networks of financial criminals who continue to look for new ways to
    keep the illicit funds flowing. The criminals are now using the tools
    and networks they built during the pandemic, along with secure
    messaging technology, to share tactics, techniques and procedures to
    expand their reach, finding new people to cash stolen checks and
    provide ``mule'' bank accounts \3\ to receive and move the funds. They
    are also becoming more sophisticated, using new advanced deepfake
    technologies to change their voice and appearance in real-time video
    calls to execute romance and impersonation scams. A significant portion
    of the $300B that was stolen during the pandemic has been reinvested by
    these criminals to create a highly advanced and sophisticated adversary
    who is a far departure from the basic phishing scams of yesteryear.
    ---------------------------------------------------------------------------
         \1\ See: https://www.sba.gov/sites/sbagov/files/2023-06/
    SBA%20OIG%20Report%2023-09.pdf.
         \2\ https://www.sba.gov/sites/sbagov/files/2023-06/
    SBA%20OIG%20Report%2023-09.pdf
         \3\ Money mules are people who, at someone else's direction,
    receive and move money obtained from victims of fraud.
    ---------------------------------------------------------------------------
        These criminals can't be stopped by banks alone, and we support law
    enforcement as they combat this scourge. While banks need to have the
    technology and infrastructure in place to defend themselves and their
    customers, they can only provide the leads necessary for law
    enforcement to track down the perpetrators. Banks also need the telecom
    companies and their regulators to close regulatory loopholes that allow
    criminals to spoof legitimate names and phone numbers to convince
    customers they are speaking with a bank. Banks need social media
    companies to proactively root out accounts pretending to be bank
    employees or financial advisors to convince people to put their money
    into their investment scams. Banks need the postal service to improve
    the security of the mail system so that when someone mails a check, it
    won't get intercepted, stolen, altered and cashed by the criminal. Most
    importantly, banks need strong partnerships with law enforcement, so
    the resources to combat these crimes match the amount of money being
    stolen from consumers. And when these criminals are caught, the
    punishments must match the crime, so these offenders won't continue to
    steal from American consumers and businesses. Banks also welcome the
    chance to partner with community-based organizations that are doing
    critical work in this area, as they are trusted voices in many
    underrepresented communities.
        Banks clearly play a key role in fighting fraud, but unless every
    player in the ecosystem joins the fight, criminals will continue to
    steal at a scale we've never witnessed before.
    State of Fraud Today
        Banks have made significant progress in protecting themselves and
    their customers from being hacked. One recent industry analysis found
    that Financial Services, which is a category that includes more than
    just banks, account for only 5.4 percent of ransomware attacks in Q3
    2023. \4\ Unfortunately, bank customer losses from scams and fraud have
    been increasing significantly. Reliable data on consumer fraud is
    scarce, but the Federal Bureau of Investigation's (FBI) Internet Crime
    Complaint Center (IC3) is the Nation's hub for businesses and consumers
    to report cybercrime and elder fraud. \5\ This data is limited to
    certain types of fraud, and therefore underreports the true dollar
    amount of fraud perpetrated, but it is still a useful proxy to identify
    trends and compare the number of different internet-based scams.
    ---------------------------------------------------------------------------
         \4\ https://www.coverware.com/blog/2023/10/27/scattered-
    ransomware-attribution-blurs-focus-on-ir-fundamentals
         \5\ www.ic3.gov
    ---------------------------------------------------------------------------
        In the IC3's 2022 Internet Crime Report (the Report), released in
    March 2023, data showed a nearly 50 percent increase in losses reported
    by consumers and businesses from 2021 to 2022
    ---------------------------------------------------------------------------
         \6\ https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf.

        According to the Report, the top three categories of scams in order
    of victim losses were investment scams, business email compromise, and
    technical support scams. The rise of investment scams was especially
    pronounced with an increase of 127 percent from 2021 of $1.45B to
    $3.31B lost.
        While the top three scams rely on different mechanisms,
    impersonation is the common enabling factor. Impersonation scams can
    take many different forms, including a criminal pretending to be a
    financial advisor or romantic partner to convince someone to invest in
    the next ``can't miss'' opportunity, or a criminal who has hacked a
    realtor's email account and then convinces the buyer to change the
    wiring instructions for the home-closing costs.
        Impersonation scams directly affect banks and their customers. In
    June 2023, the Federal Trade Commission (FTC) published a Data
    Spotlight \7\ that identified the top text messaging scams of 2022. The
    top scam was an impersonation scam--which is often in the form of a
    fake fraud alert from a bank:
    ---------------------------------------------------------------------------
         \7\ https://www.tic.gov/news-events/data-visualizations/data-
    spotlight/2023/06/iykyk-top-text-scams-2022

            Reports about texts impersonating banks are up nearly
            twentyfold since 2019. You might get a fake number to call
            about supposed suspicious activity. Or they might say to reply
            ``yes or no'' to verify a large transaction (that you didn't
            make). If you reply, you'll get a call from the (fake) fraud
            department. People say they thought the bank was helping them
            get their money back. Instead, money was transferred out of
            their account. This scam's median reported loss was a whopping
    ---------------------------------------------------------------------------
            $3,000 last year.

        It's not just the private sector that is being impersonated. Just
    this year the Consumer Financial Protection Bureau (CFPB) became the
    victim of an imposter scam, confirming that ``scammers are using CFPB
    employees' names to try to defraud members of the public. We've heard
    from people, specifically older adults, who received phone or video
    calls.'' \8\ Unfortunately, many times these types of scams
    impersonating public and private entities are aided by inadequate
    technology controls that allow the criminals to show a legitimate
    business or agency phone number and name on caller ID giving an air of
    authenticity to the criminal.
    ---------------------------------------------------------------------------
         \8\ https://www.consumerfinance.gov/about-us/blog/beware-of-new-
    cfpb-imposter-scams/
    ---------------------------------------------------------------------------
        Though losses from the internet and impersonation-based scams are
    most prominent, check fraud has become one of the fastest-growing
    categories of fraud impacting consumers across the country. However, as
    noted above, it is extremely difficult to gather the actual volume of
    check fraud being perpetrated as there is no central repository of
    data. The IC3 does provide some data, but it combines check and credit
    card fraud for a value of $264M for 2022. Judging by what we are
    hearing from our members, this very likely underrepresents the actual
    volumes of check fraud; one bank alone has reported losses of over
    $100M in a single quarter due to check fraud.
        In order to determine if the anecdotal growth being reported is
    accurate, we must cross reference it with trend data. Treasury's
    Financial Crimes Enforcement Network (FinCEN)--charged with collecting
    and analyzing information about financial transactions to combat money
    laundering and financial crimes, including confidential Suspicious
    Activity Reports (SARs) banks are legally required to file--provides
    one such source. FinCEN categorizes and tracks the types of SARs being
    filed and the growth of check fraud-related reports by banks and other
    financial institutions has become so substantial that early last year
    FinCEN published an alert on the ``Nationwide Surge in Mail Theft-
    Related Check Fraud Schemes Targeting the U.S. Mail''. The alert
    states:

            In 2021, financial institutions filed more than 350,000 SARs to
            FinCEN to report potential check fraud, a 23 percent increase
            over the number of check fraud-related SARs filed in 2020. This
            upward trend continued into 2022, when the number of SARs
            related to check fraud reached over 680,000, nearly double the
            previous year's amount of filings. \9\
    ---------------------------------------------------------------------------
         \9\ https://www.fincen.gov/sites/default/files/shared/
    FinCEN%20Alert%20Mail%20Theft-Related%20Check%20Fraud%20FINAL%20508.pdf

    Even though the exact dollar value of fraud being committed can't be
    determined, the trends are clear and troubling. Fraud is increasing
    across all channels. Banks are investing heavily in new technologies
    and capabilities to try to stop it, but when customers are duped into
    giving their money to criminals or mail gets stolen from a post office,
    there are limits to what banks can do. Attacking these trends requires
    ---------------------------------------------------------------------------
    work in the following areas:

        Continue To Enhance Banks' Anti-Fraud Operations--The scale
            of fraud being experienced may make existing procedures and
            policies obsolete and banks must continue to look for ways to
            improve bank to bank recoveries and customer experiences.

        Increase Consumer Education--Securing someone's account
            doesn't help if they can be convinced to willingly hand over
            their money or their login credentials.

        Close Loopholes To Stop Impersonation Scams--Too many
            loopholes, such as phone number spoofing, exist allowing
            criminals to impersonate legitimate businesses and agencies.

        Improve Information-Sharing--Criminals have an active
            information-sharing ecosystem that banks and the public sector
            must match to try to slow the flow of illicit funds.

        Enhance Collaboration With Law Enforcement and Regulators--
            Law enforcement plays a critical role in stopping fraud and
            ensuring perpetrators are prosecuted and prevented from further
            activity.
    Banks Are Continually Improving Anti-Fraud Operations
        The rise in fraud has not only impacted consumers but banks as
    well. The rise in the volume of cases, the complexity of processing
    check fraud claims, and the significant churn in personnel that
    occurred as a result of the pandemic created very significant
    operational challenges for banks, resulting in processing delays for
    check fraud claims.
        Banks are working diligently to reduce current timelines and
    improve the overall experience for customers. In the majority of
    instances, and assuming a customer reports the fraud promptly, they are
    not liable for a fraudulent check and the bank will make them whole.
    The process requires the bank that accepted the check for deposit (bank
    of deposit) and the bank that issued the check (the paying bank) to
    work out liability under applicable State law and contractual
    agreements. This is achieved in a number of ways, depending on the
    reason the check is unpayable. For certain claims, the paying bank
    whose customer has notified them of a fraudulent check will file a
    check warranty breach claim with the bank of deposit. Given the wide
    range of banks involved, one of the biggest challenges is determining a
    point of contact with which to exchange a claim.
        Recognizing this challenge, in 2023 ABA worked collaboratively with
    other industry groups to establish a check fraud working group focused
    on expediting the processing of check fraud claims. Among other things,
    the working group exchanged points of contact and documentation
    requirements to process a claim. And while the working group focused on
    the banks handling the vast majority of claims, its success has
    resulted in ABA developing an online check fraud directory that any
    bank--whether an ABA member or not--can access for free as long as they
    reciprocate and provide their contact information. In just over 6
    months the directory has grown to nearly 1,700 banks, and we have heard
    from banks how invaluable this resource is in speeding up the claim
    processing timeline. Our job is not done yet, and we continue efforts
    to expand the number of participating banks in the directory.
        In addition to the directory, the check fraud working group has
    undertaken efforts to improve the overall claims process for banks and
    customers alike, including:

        Drafting a Universal Warranty Breach Claim form to help
            standardize the required information for a claim, reducing
            duplicative submissions.

        Reducing burdensome documentation hurdles by encouraging
            banks to drop notarization requirements.

        Making it easier to file a claim if a customer's stolen
            check was going to pay a recurring bill to a large company
            (e.g., an electric utility) by not requiring the normally
            standard affidavit from the utility, which can be very
            difficult for the consumer to obtain.

        Developing industry baselines for notifying the paying bank
            when a claim was received, assigning it a claim number, and
            providing an estimated time for processing.

        Attempting to standardize the time after a claim has been
            adjudicated and paid out, which can vary significantly.

    The processing of check warranty breach claims is surprisingly complex
    and difficult, but banks and the ABA are committed to improving the
    system.
    Banks Provide Extensive Consumer Education
        Consumers are on the front lines of this fight, and we need to do
    all we can to ensure they have the tools and knowledge they need to
    protect themselves. Many banks have significantly increased their
    education of customers. For example, many provide tips for spotting
    scams in branches, customer communications, and websites and provide
    timely warnings that customers not share passcodes or send money to
    people they do not know, in addition to participating in ABA's cross-
    industry consumer education efforts
        However, while banks can help to keep customers' accounts secure,
    these controls can be defeated if a criminal convinces the customer to
    let them into the customer's account or to send them money. Ultimately,
    banks have little power to stop customers from withdrawing their own
    money, and indeed victims often are coached to ignore the bank
    employees who warn them not to withdraw or send the money. People need
    to hear from other sources as well, and ABA encourages other trusted
    sources, such as Government actors or nonprofits, to partner with us to
    amplify the important work banks are doing to educate consumers on
    fraud.
    Stopping Phishing
        One of ABA's most important consumer protection initiatives is our
    #BanksNeverAskThat \10\ anti-phishing campaign. Since its launch in
    October 2020, we have helped educate millions of consumers on how to
    spot common scams from bad actors posing as their bank.
    ---------------------------------------------------------------------------
         \10\ www.banksneveraskthat.com
    ---------------------------------------------------------------------------
        The public awareness campaign, developed with input from banks of
    all sizes across the country, educates consumers by posing ridiculous
    questions banks would never ask a customer. Using humor and bold
    graphics, we hope to drive home the message that your bank will also
    never ask for your password, pin, or Social Security number. ABA
    provides all of the campaign materials free of charge to any bank in
    the country interested in participating, so they can deliver the
    #BanksNever
    AskThat messaging in their local markets.
        The campaign has increased in size and scope each year. To date,
    more than 2,300 banks have participated in #BanksNeverAskThat and
    spread its educational content to millions of Americans through social
    media, bank websites, ATM screens, and bank branches across the
    country. ABA has promoted the campaign nationally and anyone who has
    been to a Capitals, Wizards, or Nationals game has probably seen its
    education message.
        In 2023, ABA launched a Spanish language version of the campaign,
    available at www.BancosNuncaPidenEso.com. This year's campaign also
    features an interactive quiz, an educational video game and short
    entertaining videos. The campaign has been recognized by Federal,
    State, and local officials for its consumer protection message, and it
    has received numerous national awards for its creative approach. We've
    briefed other industry trade groups interested in launching something
    similar and are already planning for next year's campaign.
    Combating Elder Fraud
        In addition to its public outreach campaign, ABA through the ABA
    Foundation has active programs to protect seniors from scams. Given the
    seriousness of the issues facing older customers, ABA works through its
    nonprofit foundation to ensure that all banks, irrespective of
    membership status, can access tools and resources to prevent, detect,
    and combat elder financial exploitation.
        The ABA Community Engagement Foundation, known as the ABA
    Foundation, is a 501(c)3 corporation that helps banks and bankers make
    their communities better. Through its leadership, partnerships and
    national programs, the Foundation supports bankers as they provide
    financial education to individuals at every age, elevate issues around
    affordable housing and community development and achieve corporate
    social responsibility objectives to improve the well-being of their
    customers and communities.
        The ABA Foundation offers banks a free toolkit on ``Protecting the
    Financial Security of Older Americans''. This three-part resource is
    designed to help banks develop a framework on educating and engaging
    their communities on preventing elder financial exploitation.
        Since 2016, more than 1,850 banks have participated in the ABA
    Foundation's Safe Banking for Seniors program. \11\ Through the free
    initiative, participating banks have access to turnkey materials to
    inform their communities about avoiding scams, choosing executors,
    financial caregiving, preventing identity theft, known perpetrator
    fraud, and understanding powers of attorney. Banks use the materials to
    help empower their communities and lead a combination of in-person and
    virtual workshops, post videos and other content on social media, and
    share vital information during one-on-one conversations at teller
    stations. All the resources are available at no cost to ABA member and
    nonmember banks.
    ---------------------------------------------------------------------------
         \11\ https://www.aba.com/seniors
    ---------------------------------------------------------------------------
        Through a prior partnership with the FTC, the ABA Foundation also
    developed infographics to raise awareness about scams that
    disproportionately affect older customers. Banks and nonbanks alike can
    freely access and disseminate materials on: Fake Check Scams,
    Government Imposter Scams, Imposter Scams, Money Mule Scams, Online
    Dating Scams, Phishing Scams, and Peer to Payments. \12\
    ---------------------------------------------------------------------------
         \12\ https://www.aba.com/advocacy/community-programs/consumer-
    resources/protect-your-money
    ---------------------------------------------------------------------------
        While ABA's campaigns have been instrumental in educating the
    public, we are just one voice. We need a nationwide message coordinated
    among multiple agencies (including the CFPB and FTC), nonprofits, and
    private companies to promote a simple and memorable action plan for
    people of all ages facing scams. The campaign should also focus on
    dispelling the behavioral techniques scammers use in
    impersonating authorities, indicating urgency, requiring secrecy, and
    manipulating people into action.
    Changes Are Needed To Stop Impersonation Scams
        Criminals' ability to impersonate legitimate businesses or
    Government agencies is a major challenge that needs to be addressed to
    reduce the amount of fraud Americans experience. The challenge can be
    made more difficult when criminals are able to misrepresent themselves
    either through a spoofed caller ID that shows a legitimate business
    name and business' phone number, or through stolen or copycat social
    media accounts that are indistinguishable from real accounts.
        Currently technology can help criminals impersonate legitimate
    actors through three primary channels:

        Spoofing of Caller ID--Criminals have figured out loopholes
            that allow them to ``spoof'' the numbers and names of
            legitimate businesses with intent to defraud the call
            recipient. For example, banks have reported that customers have
            received calls that show they are coming from the 1-800 number
            listed on the back of their debit card. When a customer is
            presented with what they believe is technologically validated
            information, it significantly aids the criminal in convincing
            the customer that they are from their bank.

        Impersonation Text Messages--Criminals can use email-to-
            text tools to create text messages that look like they come
            from a bank or simply use similar numbers and formats to
            pretend they're from a bank. These can include links to fake
            bank websites, call-back numbers, or prompts that cause the
            criminal to call the customer to socially engineer them to give
            up security credentials or send money from their accounts.

        Stolen or Spoofed Social Media Accounts--The FBI reported
            that investment scams had the highest losses in dollars. There
            are many ways these scams can be perpetrated but one recent
            example is the unknowing takeover of actual bank employees'
            social media accounts, which were then used to reach out to
            their connections to convince them to invest in fraudulent
            investment scams.
    Spoofing of Caller ID Information
        The Secure Telephone Identity Revisited (STIR) and Signature-based
    Handling of Asserted Information Using toKENs (SHAKEN) caller ID
    authentication framework established by the Federal Communications
    Commission (FCC) is meant to help protect consumers from illegally
    spoofed robocalls by verifying that the caller ID information
    transmitted with a particular call matches the caller's telephone
    number. \13\ Unfortunately, technical limitations of existing networks
    used, particularly non-IP networks, and calls originating from overseas
    communications providers have hampered the effectiveness of the
    framework, leaving loopholes that criminals can exploit to spoof the
    data (i.e., phone number) shown on a consumer's caller ID. We
    appreciate that the FCC continues to make progress in fully
    implementing STIR/SHAKEN across all networks. Nonetheless, ABA strongly
    believes that more needs to be done. Only callers whose calls are fully
    authenticated--signed at origination and attested throughout the call's
    pathway--should be able to display data in the recipient's caller ID
    display. If at any point the authentication cannot be validated, the
    caller ID should simply display ``unknown caller.'' We recognize that
    due to technical limitations some legitimate callers may have their
    caller ID data dropped, but we believe erring on the side of caution is
    the best course due to the vast scale of impersonation fraud being
    committed.
    ---------------------------------------------------------------------------
         \13\ https://www.fcc.gov/call-authentication
    ---------------------------------------------------------------------------
        Additionally, we believe that telecommunications providers who
    enable criminals to impersonate legitimate numbers and incorrectly
    authenticate their calls with impersonated numbers and company names
    should be held to account. We have expressed strong support \14\ for
    the FTC's proposal to prohibit entities from providing the ``means and
    instrumentalities'' for another to impersonate a Government or
    business. \15\ We agree with the statement made by the National
    Association of Attorneys General in that proceeding that ``when an
    entity provides substantial assistance or support to impersonators and
    knows or should have known that their
    products [or] services are being used in a fraudulent impersonation
    scheme, that company could also be held liable under the proposed
    impersonation rule.'' \16\
    ---------------------------------------------------------------------------
         \14\ Letter from Am. Bankers Ass'n, et al., to Lina Khan, Chair,
    Fed. Trade Comm'n (Dec. 16, 2022), https://www.aba.com/advocacy/policy-
    analysis/impersonation-proposal-comment-letter/.
         \15\ Notice of Proposed Rulemaking and Request for Public Comment,
    Trade Regulation Rule on Impersonation of Government and Businesses, 87
    FR 62,741, 62,751 (Oct. 17, 2022).
         \16\ Comments of Nat'l Ass'n of Attorneys General 10 (Feb. 23,
    2022), https://www.regulations.gov/comment/FTC-2021-0077-0164.
    ---------------------------------------------------------------------------
        The vast majority of telecommunications providers follow the law,
    but those who know or should know that they are enabling criminals to
    steal from Americans should be held accountable and be liable for the
    harms they enable.
    Impersonation Text Messages
        Texting has become a primary method of communication for Americans
    and criminals have shifted their tactics to ``meet their customers
    where they are.'' ABA has focused on ensuring that banks have the tools
    to identify fraudulent texting trends quickly enough to prevent or
    mitigate customer harm. Unfortunately, banks are still encountering
    barriers as they seek to prevent fraudulent texts from reaching
    customers.
        ABA has supported the FCC's efforts to combat illegal text
    messages, but we believe more needs to be done. With ABA's support, the
    FCC now requires ``terminating mobile wireless providers'' (providers
    that deliver calls to recipients) to investigate and potentially block
    texts from a sender after they are on notice from the agency that the
    sender is transmitting suspected illegal texts. \17\ We have urged the
    FCC to apply this requirement to entities that originate text messages,
    as these entities are best positioned to stop illegal texts from being
    sent in the first place. Last spring, ABA identified ``email-to-text''
    as a common method by which bad actors send large numbers of phishing
    or otherwise fraudulent messages because the bad actor can load
    consumers' cell phone numbers into an email application to send these
    texts. \18\ We support the FCC's December 2023 statement encouraging
    providers to make email-to-text an opt-in service--whereby consumers
    have the option whether they receive text messages that originated
    through an email platform. \19\
    ---------------------------------------------------------------------------
         \17\ In the Matter of Targeting and Eliminating Unlawful Text
    Messages, CG Docket No. 21-402, Rules and Regulations Implementing the
    Telephone Consumer Protection Act of 1991, CG Docket No. 02-278,
    Advanced Methods to Target and Eliminate Unlawful Robocalls, CG Docket
    No. 17-59, Second Report and Order, Second Further Notice of Proposed
    Rulemaking in CG Docket Nos. 02-278 and 21-402, and Waiver Order in CG
    Docket No. 17-59, para. 16-25 (released Dec. 18, 2023) [hereinafter,
    Second Report and Order].
         \18\ Reply Comments of Am. Bankers Ass'n, et al., In the Matter of
    Targeting and Eliminating Unlawful Text Messages, CG Docket No. 21-402,
    Rules and Regulations Implementing the Telephone Consumer Protection
    Act of 1991, CG Docket No. 02-278, at 8 (filed June 6, 2023), https://
    www.aba.com/advocacy/policy-analysis/joint-ltr-txt-msgs-lead-generators
    [hereinafter, ABA Reply Comments].
         \19\ Second Report and Order, supra note 17, at para. 86.
    ---------------------------------------------------------------------------
        We also have urged the FCC to finalize a requirement that text
    messages be authenticated and set a deadline for the development and
    mandatory implementation of a text message authentication solution.
    \20\ As described earlier, bad actors use numerous approaches to
    impersonate legitimate companies in text messages sent to consumers.
    The FCC should work with mobile wireless providers and other entities
    involved in the texting ecosystem to design an authentication framework
    that prevents bad actors from sending to consumers text messages that
    impersonate legitimate companies, while at the same time ensuring that
    text messages from legitimate companies are not blocked. \21\
    ---------------------------------------------------------------------------
         \20\ ABA Reply Comments, supra note 18, at 10-11.
         \21\ In designing an authentication framework, however, the
    Commission should recognize that legitimate companies frequently send
    text messages through ``short code'' text messages--a five- or six-
    digit number registered through CTIA's short-code registry that
    businesses use to send and receive text messages--or through a 10-digit
    number that is registered with a third-party aggregator. Short Code
    Registry, Frequently Asked Questions, https://www.usshortcodes.com/
    learn-more/faq (last visited May 2, 2023). The FCC should ensure that
    the framework adopted does not interfere unduly with these texts.
    ---------------------------------------------------------------------------
        Beyond creating an authentication regime for text messages, the FCC
    should provide banks with access to the information necessary to
    protect their customers from fraudulent texts. Currently, the
    telecommunications industry asks that the public forward scam texts to
    the short code 7726, which spells ``SPAM'' on your phone. It would be
    very helpful for banks to have access to the spam messages in order to
    identify those impersonating their bank and the fake phone numbers and
    links they are trying to get consumers to use. In fact, one bank worked
    with telecommunications companies to establish a pilot program whereby
    the bank gained access to and reviewed reported SPAM data. The bank
    then used that data to actively issue take-down requests to the
    relevant phone numbers and internet links that were in the messages so
    that they no longer functioned. Unfortunately, this program was
    discontinued because the telecommunication companies revoked the bank's
    access to the data.
        We strongly urge policymakers ensure banks and other legitimate
    businesses are allowed to access, with appropriate privacy safeguards,
    data from scam/spam reporting services, whether it is the 7726 data,
    the ``Report Junk'' data in Apple's iMessage application, or other
    similar scam/spam reporting features in other closed messaging
    applications. Additionally, consideration should be given to requiring
    all significant messaging services to operate a ``Report Spam'' feature
    and be required to share that data so that businesses can protect their
    customers even if these messaging providers are unwilling to do so.
    Stolen or Spoofed Social Media Accounts
        Criminals also target consumers by stealing personal social media
    accounts of employees of legitimate businesses or building fake
    accounts that portray them as working for that business. In both
    instances, the brand of the company, often a bank, is used to grant
    legitimacy to the criminal's posts or messages. While this is a complex
    problem to combat and prevent, once these ``impersonation accounts''
    are identified there should be a simple, quick, and free method to
    request that they be taken down. Unfortunately, no major social media
    company offers such a method.
        ABA strongly urges policymakers to ensure that social media
    companies provide a method to report impersonation accounts that is
    free to access and to use, and that results in an expedited removal of
    the offending account. Additionally, we recommend that if the hosting
    company refuses to take down the impersonation account, they then may
    be held liable for any fraud committed by that account as they are
    clearly providing the ``means and instrumentalities'' and have
    knowledge that the account is engaged in fraud.
        Banks are committed to protecting their customers' data and money.
    Our goal is to provide a safe and sound financial system that allows
    our customers to achieve their financial goals. Banks spend billions of
    dollars a year on cybersecurity and antifraud measures to provide one
    of the most secure banking systems in the world, but banks can't do it
    alone. The technology companies that enable criminals to pose as
    trusted agents must help as well. The criminals have realized the
    challenges in directly hacking someone's bank account, so instead they
    focus on convincing customers to give them that access. This is made
    easier when a phone, text message, or social media site tells a
    consumer they are speaking with a banker and not the criminal behind
    the screen.
    Improve Information-Sharing To Combat Fraud
        Given the massive scale and global reach of fraud, it is simply not
    possible for one bank to fight back alone; collaboration is required to
    ensure success. One of the most important tools banks have in combating
    financial crimes is shared information. However, due to inconsistencies
    across financial institutions, among other reasons, there are
    challenges in accessing actionable information in a timely manner.
        That is why ABA has been working to establish a program to help
    banks share information that identifies activity that may involve
    terrorist financing or money laundering, and predicate crimes like
    fraud. ABA formed an association of banks to design and develop this
    new information-sharing exchange, which ABA will manage. The goal is to
    encourage the sharing of information in real-time so it can reduce the
    flow of funds to criminals' accounts and improve the quality of banks'
    reporting. We believe this effort can make a real difference in
    fighting fraud and other financial crime.
    Partnership With Law Enforcement and Regulators
        As I have discussed, the rising tide of fraud cannot be fixed by
    banks or technology alone. At some point, the criminals executing this
    fraud need to be caught, prosecuted, and sentenced so that they no
    longer commit these crimes. ABA has a history of partnering with law
    enforcement and the public sector on education and outreach activities
    along with identifying potential improvements in addressing fraud.
        For example, ABA and the U.S. Postal Inspection Service (USPIS) are
    entering into a formal partnership to combat check fraud. It is often
    publicized that the increase in check fraud is partly due to criminals
    targeting the U.S. mail infrastructure by stealing mailed checks and
    altering (washing) them, leading to fraudulent transactions at banks.
        This agreement builds on our current partnership--dating back to
    early 2022--when we began joint training initiatives to proactively
    address fraud: USPIS briefings for ABA-hosted fraud information-sharing
    groups, participation in ABA webinars, and platforms at ABA
    conferences. Drawing on USPIS and ABA's respective resources and reach
    allows us to educate the public and bank and Postal employees with
    joint training and red flag alerts at a greater scale.
        ABA and USPIS will kick off this new partnership by hosting a free
    webinar for banks with the USPIS on ways they can collect evidence and
    support criminal investigations. Following this webinar, ABA and USPIS
    will distribute co-branded materials to educate bank customers and
    consumers on how to spot and report on common check fraud activity.
        ABA also applauds efforts by other agencies to educate the public
    regarding fraud and scams. We lead a committee on the FTC's Stop Senior
    Scams Advisory Group focused on the freezing and recovery of fraudulent
    transfers, are active in the Federal Reserve Bank of Boston's Scams
    Definition and Information-Sharing Working Group and have worked with
    CFPB on elder fraud prevention tools such as trusted contacts adoption
    among depository institutions and powers of attorney. \22\
    ---------------------------------------------------------------------------
         \22\ https://files.consumerfinance.gov/f/documents/cfpb_trusted-
    contacts-fis_2021-11.pdf
    ---------------------------------------------------------------------------
        There are more opportunities for agencies to improve consumer
    education about scams. For example, Congress established a Financial
    Education Office in the Consumer Financial Protection Bureau with a
    statutory mandate to ``be responsible for developing and implementing
    initiatives intended to educate and empower consumers to make better
    informed financial decisions.'' \23\ We encourage the CFPB to
    prioritize using this office's resources to help consumers detect and
    avoid scams and would welcome an opportunity to work collaboratively,
    as we have done with the FCC, FTC, FBI, and USPIS.
    ---------------------------------------------------------------------------
         \23\ Dodd-Frank Act Wall Street Reform and Consumer Protection
    Act, 12 U.S.C. 5493 1013(d).
    ---------------------------------------------------------------------------
        While agencies can also effect fraud prevention through their
    regulatory actions, we urge them to take care not to impede or inhibit
    banks' fraud prevention efforts. For example, recently the CFPB
    outlined changes it is considering to regulations implementing the Fair
    Credit Reporting Act (FCRA), which could have a significant impact on
    banks' work to detect and prevent fraud, identity theft, and other
    financial crimes. \24\ Among these, the CFPB is contemplating narrowing
    the permissible purposes for which information can be used under the
    FCRA, treating consumer-identifying information (including name,
    address, and Social Security number) as a consumer report subject to
    the FCRA, while expanding who could be considered a consumer reporting
    agency to potentially include vendors banks rely on to assist with
    fraud prevention. Doing so could create new legal, practical, and
    procedural difficulties for banks that use this information to detect
    and prevent fraud and crime. Indeed, a Small Business Regulatory
    Enforcement Fairness Act (SBREFA) that reviewed the CFPB's potential
    policies for their impact on small entities specifically recommended
    that the CFPB carefully consider the impacts on fraud prevention and
    detection, identity verification, and law enforcement and ``consider .
    . . ways to mitigate any negative effects.'' \25\ It is important that
    the CFPB and other regulators consistently evaluate how each policy
    they consider may impact banks' efforts to detect and prevent fraud.
    ---------------------------------------------------------------------------
         \24\ CFPB, Small Business Advisory Review Panel for Consumer
    Reporting Rulemaking Outline of Proposals and Alternatives Under
    Consideration (Sept. 15, 2023), https://files.consumerfinance.gov/f/
    documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf
         \25\ Final Report of the Small Business Review Panel on the CFPB's
    Proposals and Alternatives Under Consideration for the Consumer
    Reporting Rulemaking (Dec. 15, 2023) at 47-48, https://
    files.consumerfinance.gov/f/documents/cfpb_sbrefa-final-
    report_consumer-reporting-rulemaking_2024-01.pdf.
    ---------------------------------------------------------------------------
        Law enforcement is a critical force in preventing and detecting
    fraud, and ABA applauds work by the FBI, United States Secret Service,
    and FinCEN to try and freeze funds that have been transferred
    fraudulently. The FBI IC3 Recovery Asset Teams have been great
    partners, but we are concerned that they may lack capacity to engage on
    lower-dollar frauds that are reported to the IC3 portal. We would
    welcome a partnership with them to identify those cases that may not be
    pursued in a timely manner to determine whether a public-private
    partnership could be created to pursue those cases and result in more
    funds being returned to consumers. Congress has recommended similar
    efforts by the Treasury Department, as seen in a report accompanying a
    bipartisan Senate Appropriations bill approved by the Committee
    unanimously, last year, which urged the facilitation of a public-
    private partnership on fraud prevention. \26\
    ---------------------------------------------------------------------------
         \26\ See p. 10; https://www.appropriations.senate.gov/imo/media/
    doc/fy24_fsgg_report.pdf.
    ---------------------------------------------------------------------------
        Americans are losing billions of dollars to fraud annually. Yet,
    amid resource constraints and competing demands, local law enforcement
    struggle to devote appropriate time and attention to these cases. Given
    the levels of fraud taking place against Americans, police departments
    and sheriff's offices should not have to choose between dedicating
    personnel to violent crimes and financial fraud cases.
        Additionally, law enforcement personnel need more effective
    training on addressing and responding to fraud allegations. Fraud is a
    continually evolving landscape and new fraud typologies develop each
    day. Enforcing the law and responding to these cases requires
    understanding the multifaceted strategies criminals employ to defraud
    Americans, particularly with respect to cybercrime. As such, we
    recommend strengthening the relationship between local law enforcement
    and Federal agencies.
        Moreover, while the losses Americans experience goes to U.S.-based
    criminals, large amounts are being transferred overseas and potentially
    by and to those who threaten our national security. The lack of a
    centralized fraud response and tracking capability within the U.S.
    Government hinders the ability to spot trends, track tactics,
    techniques and procedures, and the ability to recover funds for
    Americans when fraud has been identified. Additionally, there is no
    central agency with which banks can work on innovative programs to
    defeat fraud and recover funds.
    Conclusion
        Banks are working every day to protect their customers from fraud
    by investing in new technologies, deploying public relations campaigns
    to educate consumers and small businesses about old and new scams, and
    partnering with law enforcement and other Federal agencies on new
    initiatives to combat fraud. Yet our industry recognizes that there is
    more work to do, and banks can't stop criminals by themselves. Every
    player in the fraud ecosystem must play a role; from the
    telecommunications firms to the social media companies to the postal
    service. And we would welcome collaboration with community groups who
    have the trust of consumers across the country. The goal of all banks
    is to help their customers have a safe and secure financial future, and
    ABA and America's banks are ready to help protect our customers from
    fraud. I look forward to answering your questions.
                                     ______

                      PREPARED STATEMENT OF JOHN BREYAULT
        Vice President of Public Policy, Telecommunications, and Fraud,
                           National Consumers League
                                February 1, 2024
    Introduction
        The National Consumers League appreciates the opportunity to
    provide the Committee with our views on protecting consumers from fraud
    involving misuse of the banking system.
        Founded in 1899, the National Consumers League (NCL) is the
    Nation's pioneering consumer and worker advocacy organization. Our
    nonprofit mission is to advocate on behalf of consumers and workers in
    the United States and abroad. \1\ For more than 25 years, NCL has
    worked, via our Fraud.org campaign, to educate consumers about the
    warning signs of fraud and promote public policies that protect the
    American public from scams of all kinds.
    ---------------------------------------------------------------------------
         \1\ For more information, visit www.nclnet.org.
    ---------------------------------------------------------------------------
    Fraud Involving Peer-to-Peer Platforms, Gift Cards, and Cryptocurrency
            Is Getting Dramatically Worse
        There is an epidemic of fraud and identity theft in the United
    States. While the number of complaints received by the Federal Trade
    Commission (FTC) has leveled off since hitting a record of 5.96 million
    in 2021 during the height of the COVID-19 pandemic, complaint levels
    remain unacceptably high. Nearly 5.2 million consumers submitted
    complaints in 2022, according to the FTC. \2\ And while fewer
    complaints may suggest that the situation is improving somewhat,
    scammers are getting better at extracting more money from their
    victims. From 2020-2022, fraud losses increased from $3.3 billion to a
    staggering $8.8 billion. Median fraud losses more than doubled from
    $311 to $650.
    ---------------------------------------------------------------------------
         \2\ Federal Trade Commission. Consumer Sentinel Data Book 2022
    (February 2023) p. 6. Online: https://www.ftc.gov/system/files/ftc-gov/
    pdf/CSN-Data-Book-2022.pdf.
    ---------------------------------------------------------------------------
        When NCL last testified before this Committee in 2021, we warned
    that peer-to-peer (P2P) payment platforms such as Zelle, Venmo, Cash
    App, and PayPal had become ``payment methods of choice for scammers.''
    Unfortunately, the problem has only worsened since then. In 2020, the
    FTC received 62,000 complaints where
    payment apps were the method of payment, with total reported losses of
    $87
    million. \3\ By 2022, reported losses from fraud involving payment apps
    had grown to $163 million. \4\ We anticipate that when the FTC reports
    its 2023 fraud data, this regrettable trend will only continue.
    ---------------------------------------------------------------------------
         \3\ Federal Trade Commission. ``Consumer Sentinel Network Data
    Book 2020''. (February 2021) p. 11. Online: https://www.ftc.gov/system/
    files/documents/reports/consumer-sentinel-network-databook-2020/
    csn_annual_data_book_2020.pdf.
         \4\ Federal Trade Commission. ``Consumer Sentinel Data Book
    2022''. (February 2023) p. 11. Online: https://www.ftc.gov/system/
    files/ftc_gov/pdf/CSN-Data-Book-2022.pdf.
    ---------------------------------------------------------------------------
        The situation is similarly dismal when it comes to fraud involving
    one of scammers' other favorite payment methods: gift cards. In 2020,
    the FTC received 43,242 complaints where a gift card was the method of
    payment, with reported losses of $124 million. \5\ In 2022, complaints
    rose to 48,800 with losses nearly doubling to $228 million. \6\ Even
    NCL itself was recently targeted by scammers who tried to get our staff
    to purchase gift cards by impersonating our CEO. Despite the relative
    savvy of our staff, several considered going out and buying gift cards,
    scratching off the back and sending the codes as the scammers asked.
    ---------------------------------------------------------------------------
         \5\ Federal Trade Commission. ``Consumer Sentinel Network Data
    Book 2020''. (February 2021) p. 11. Online: https://www.ftc.gov/system/
    files/documents/reports/consumer-sentinel-network-databook-2020/
    csn_annual_data_book_2020.pdf.
         \6\ Federal Trade Commission. ``Consumer Sentinel Data Book
    2022''. (February 2023) p. 11. Online: https://www.ftc.gov/system/
    files/ftc_gov/pdf/CSN-Data-Book-2022.pdf.
    ---------------------------------------------------------------------------
        An explosion in the fraudulent use of cryptocurrency as a payment
    method should be of particular concern to the Committee. Since the FTC
    first began tracking it as a payment method in 2020, losses involving
    cryptocurrency payments have ballooned from $129 million to $1.59
    billion in 2022--a tenfold increase in just 2 years. Complaints
    received at NCL's Fraud.org website last year were littered with
    references to fraudulent cryptocurrency investment schemes, and such
    scams were by far the costliest type of fraud for their victims. \7\
    Law enforcement agencies-- like the Federal Bureau of Investigation--
    have reported similar spikes in cryptocurrency scam losses. \8\
    ---------------------------------------------------------------------------
         \7\ National Consumers League. ``2024 Top Ten Scams Report''.
    (Forthcoming, February 2024).
         \8\ Lyngaas, Sean, and Rabinowitz, Hannah. ``FBI Says $10 Billion
    Lost to Online Fraud in 2022 as Crypto Investment Scams Surged'',
    CNN.com. (March 13, 2023) Online: https://www.cnn.com/2023/03/13/
    politics/fbi-online-fraud-report/index.html.
    ---------------------------------------------------------------------------
        All consumers, of every age, income, and education level are
    vulnerable to falling victim to professional criminal fraudsters.
    Unfortunately, fraud is a chronically underreported crime due in part
    to the stigma too often directed at fraud victims. \9\ While these
    numbers are sobering, they are almost certainly a significant
    undercount of the true scope of the fraud.
    ---------------------------------------------------------------------------
         \9\ Ianzito, Christina. ``Let's Stop Blaming Scam Victims, New
    AARP Report Says''. AARP. (July 21, 2022) Online: https://www.aarp.org/
    money/scams-fraud/info-2022/victim-blaming.html.
    ---------------------------------------------------------------------------
    Consumers Should Not Shoulder the Costs of Financial Fraud Alone
        This data makes clear that we are not winning the fight against
    fraud. A common thread running through P2P, gift cards, and
    cryptocurrency is that once funds are sent, they are available to
    scammers on the other end of the transaction nearly instantaneously.
    And when a victim discovers the fraud, it is extremely difficult to
    recover lost funds. From a scammer's point of view, this is exactly why
    payment methods like these are so attractive in the first place.
    Through NCL's Fraud.org campaign, we know that consumers are not only
    bewildered at becoming a victim of fraud, but also outraged that the
    companies to whom they entrusted their money do so little to protect
    their customers' interests or help make them whole.
        While P2P platforms, banks, and cryptocurrency trading platforms
    profit from ever-increasing transaction volumes, they bear little of
    the costs of fraud that occur on their systems. Instead, the liability
    for fraud falls on those who can least afford to absorb the losses--
    individual consumers. The costs of fraud to individual victims can be
    life-altering. Nearly every day, NCL's fraud counselors hear stories
    from consumers of how scams erased victims' life savings and caused
    deep trauma. We clearly need better solutions.
        No amount of consumer education, better disclosure, or ``friction''
    put into payment flows will solve this problem alone. We believe the
    payment platforms where fraud occurs must have a bigger financial
    incentive to stop scams before they happen. By spreading risk across
    all the participants in this system, the costs can be better absorbed,
    resulting in a safer and more secure payments marketplace.
        A model for consumer protection for P2P apps and gift cards should
    be credit and debit cards. Thanks to the Electronic Funds Transfer Act
    (EFTA) and Fair Credit Billing Act (FCBA), consumers typically shoulder
    none of the risk when there is unauthorized use on their credit or
    debit cards. Instead, fraud risks are shared across issuing and
    receiving banks, card networks, and merchants. As a result, card
    networks are protected by 24/7 fraud monitoring, with more secure
    payment technologies such as chip-and-PIN and tap-to-pay regularly
    replacing older, out of date technology.
        From a consumer's perspective this works well. Consumers typically
    first become aware that fraud has occurred on their credit or debit
    cards when they receive communication from their bank letting them know
    that their card has been compromised and will need to be replaced.
    Unfortunately, because many of the scams involving P2P apps and gift
    cards involve consumers being induced into authorizing a transaction,
    banks and payment platforms usually refuse to bear liability for this
    fraud, resulting in a far less secure payment system. \10\
    ---------------------------------------------------------------------------
         \10\ Mierzwinski, Ed, et al. ``Virtual Wallets, Real Complaints''.
    MASSPIRG Education Fund. June 2021. p. 9. Online: https://masspirg.org/
    sites/pirg/files/reports/MA_wallets.pdf.
    ---------------------------------------------------------------------------
    Fixing the ``Unauthorized Transactions'' Loophole in EFTA Should Be a
            Priority
        To meaningfully reduce fraud on P2P apps and gift cards, a
    multifaceted approach will be required, including better information-
    sharing among stakeholders in the payments ecosystem and more fraud-
    fighting resources and authorities for law enforcement agencies.
    Congress can and should play a leading role in this effort by
    strengthening EFTA so that it protects consumers who are victims of
    induced fraud. Already, pressure from Congress has led Zelle to take
    some initial steps to protect victims of impersonation scams. \11\
    However, voluntary actions by one actor in the payments ecosystem is no
    substitute for robust safeguards that protect consumers no matter what
    payment technology they use. Congressional action is urgently needed to
    address the rising costs of fraud to consumers.
    ---------------------------------------------------------------------------
         \11\ Lang, Hannah. ``Payments App Zelle Begins Refunds for
    Imposter Scams After Washington Pressure'', Reuters. (November 13,
    2023) Online: https://www.reuters.com/technology/cybersecurity/
    payments-app-zelle-begins-refunds-imposter-scams-after-washington-
    pressure-2023-11-13/.
    ---------------------------------------------------------------------------
        NCL supports the legislative policy proposals that the National
    Consumer Law Center included in their written testimony for this
    hearing. We urge Congress to give special priority to passing
    legislation, such as the Protecting Consumers From Payment Scams Act,
    \12\ to expand the definition of ``unauthorized electronic fund
    transfer'' in the Electronic Funds Transfer Act to cover fraudulently
    induced payments. This simple fix would address fraudulently induced
    payments on all payment platforms covered by EFTA, including P2P apps
    and gift cards. Recently enacted rules in the United Kingdom require
    banks to reimburse victims of fraud in the inducement, with issuing and
    receiving banks sharing liability for making victims whole. \13\ The
    U.K.'s rules should serve as a model for U.S. law in this area.
    ---------------------------------------------------------------------------
         \12\ Online: https://democrats-financialservices.house.gov/
    UploadedFiles/BILLS-117pih-Protect
    ingConsumersFromPaym-U1.pdf.
         \13\ Payment Systems Regulator (U.K.). ``PSR Confirms New
    Requirements for APP Fraud Reimbursement''. Press release. (July 6,
    2023) Online: https://www.psr.org.uk/news-and-updates/latest-news/news/
    psr-confirms-new-requirements-for-app-fraud-reimbursement/.
    ---------------------------------------------------------------------------
    The Explosion in Cryptocurrency-Related Scams Must Be Addressed
        Cryptocurrency will soon become, and by some estimates already is,
    the payment method of choice for criminal scammers. Driven by the mania
    for Bitcoin and other cryptocurrencies, as many as 34,000
    cryptocurrency kiosks (also known at ``BTMs'') have been placed in
    convenience stores, malls, smoke shops, laundromats, and grocery stores
    around the country. \14\
    ---------------------------------------------------------------------------
         \14\ Oguz, Kaan. ``Why Bitcoin ATMs Are Taking Over Malls and Gas
    Stations Across the U.S.'' CNBC.com. (November 7, 2023) Online: https:/
    /www.cnbc.com/video/2023/11/07/why-bitcoin-atms-aretaking-over-malls-
    and-gas-stations-across-the-us.html.
    ---------------------------------------------------------------------------
        The proliferation of the kiosks in relatively insecure retail
    locations has made them a favorite tool of scammers. \15\ At Fraud.org
    we often see complaints where scammers direct victims to their closest
    convenience store to deposit cash into the criminals' cryptocurrency
    wallets. Kiosk operators, one of whom was reportedly making a 20
    percent commission on every transaction, \16\ lack sufficient
    incentives to crack down on these scams.
    ---------------------------------------------------------------------------
         \15\ Duncan, Jericka, et al. ``Unregulated Crypto ATMs Give
    Criminals a Loophole To Prey on Unsuspecting Victims'', CBS News.
    (March 22, 2023) Online: https://www.cbsnews.com/news/crypto-atm-scams-
    unregulated-machines/.
         \16\ Anderson, Zach. ``Bitcoin of America Indicted for Operating
    Unlicensed Kiosks'', Blockchain News. (March 7, 2023) Online: https://
    blockchain.news/news/bitcoin-of-america-indicted-for-operating-
    unlicensed-kiosks.
    ---------------------------------------------------------------------------
        More must be done to protect consumers from scammers using BTMs.
    Simply relying on better disclosures or undertrained retail employees
    will not meaningfully reduce fraud rates. Congress must act. To this
    end, NCL supports policies that:

        Require cryptocurrency kiosk operators to provide
            regulators the physical addresses of any crypto BTM's they
            operate;

        Require cryptocurrency kiosk operators to abide by
            longstanding anti-money laundering and know-your-customer
            requirements, including ID verification for parties involved in
            a transaction;

        Require businesses that host cryptocurrency kiosks to
            provide training to their employees on how to spot and
            intervene in likely fraud involving crypto ATMs; and

        Require businesses that host cryptocurrency kiosks to
            prominently display warnings about the risks associated with
            depositing cash into crypto ATMs, especially when the funds
            will go to digital wallets the consumer does not own.

        Senator Warren's Digital Asset Anti-Money Laundering Act of 2023
    includes many of these protections and would do much to begin cracking
    down on the use of cryptocurrency as a payment method for fraudsters.
    \17\ Her bill has NCL's full support and we urge the Committee to
    approve it.
    ---------------------------------------------------------------------------
         \17\ Senator Elizabeth Warren. ``Warren Expands Coalition of
    Banking Committee Support for Bill Cracking Down on Crypto's Use in
    Money Laundering, Drug Trafficking, Sanctions Evasion''. Press release.
    (December 11, 2023) Online: https://www.warren.senate.gov/newsroom/
    press-releases/warren-expands-coalition-of-banking-committee-support-
    for-bill-cracking-down-on-cryptos-use-in-money-laundering-drug-
    trafficking-sanctions-evasion.
    ---------------------------------------------------------------------------
    Conclusion
        Chairman Brown, Ranking Member Scott, and the Members of the
    Committee, we thank you for your continuing work to protect consumers
    and for holding this hearing. On behalf of the National Consumers
    League, thank you for including the consumer perspective as you
    consider these important issues.
             RESPONSE TO WRITTEN QUESTION OF SENATOR BUTLER
                        FROM CARLA SANCHEZ-ADAMS

    Q.1. Ann Booras, a teacher from East Bay had $20,000 snatched
    from her by a scammer who called her, pretending to be from her
    bank, Wells Fargo, and claimed to be investigating fraud. She
    was asked to wire $20,000 and $5,000 from her account; the wire
    for transfer for $5,000 was recovered but the larger sum was
    not. Sadly, Ann's story of wiring her hard-earned money to
    criminals is not an isolated one. When she received the scam
    call, her caller ID even said Wells Fargo bank. Ann realized
    what had happened and contacted Wells Fargo, her request for
    reimbursement was denied on the grounds that she had authorized
    the transaction.
        Ms. Sanchez-Adams, what can be done to help steer financial
    institutions to refund unauthorized transactions and ensure
    that funds are returned to customers in a timelier manner?

    A.1. The transactions described in this story are examples of
    fraudulently induced transfers through bank-to-bank wire
    transfer. I have heard of so many stories with the same type of
    fraudulently induced transfers, often referred to by the
    payment industry as ``imposter'' scams, where a fraudster poses
    as a customer's own bank and even spoofs the bank's own phone
    number to deceive and manipulate a consumer into initiating a
    transfer. Because the consumer initiates the transaction, it is
    considered to be ``authorized'' by the consumer, even though
    the consumer only initiated the transfer based on the deception
    and manipulation of the fraudster. Currently, there are no
    clear protections for fraudulently induced transfers under
    Federal law.
        Even if the transfer had been unauthorized, where the
    consumer did not know of the transaction and did not initiate
    it, bank-to-bank wire transfers also have very little
    protection under the law. Instead of the clear consumer
    protections provided by the Electronic Funds Transfer Act
    (EFTA), which was designed to protect consumers with clear
    rights and procedures, bank-to-bank wire transfers are covered
    under State law, more specifically a State's adopted version of
    Uniform Commercial Code Article 4A (UCC Article 4A). The UCC
    was not designed as a consumer protection statute and was
    instead designed to govern commercial-to-commercial
    transactions. UCC Article 4A offers very weak or no protection
    for consumers who have suffered harm due to bank-to-bank wire
    transfer fraud. In essence, the consumer is deemed to have
    authorized a wire transfer if the bank utilized a commercially
    reasonable security procedure that the bank and the consumer
    agreed to beforehand and if the bank acted in good faith. Yet
    consumers have no understanding of or control over those
    security procedures and no choice but to click ``I agree'' to
    the fine print of an agreement.
        For example, the New York Attorney General recently filed a
    lawsuit against Citibank alleging it failed to protect and
    reimburse victims of electronic fraud when it used ``poor
    security and anti-fraud protocols'' that consumers had not
    negotiated with Citibank. \1\ According to the lawsuit,
    Citibank connected wire transfer services to consumers' online
    and mobile banking apps in recent years--allowing direct
    electronic access to the wire transfer networks--but employed
    lax security protocols and procedures; had ineffective
    monitoring systems; failed to respond in real-time; and failed
    to properly investigate fraud claims. \2\ As a result, New
    Yorkers lost millions of dollars in life savings, their
    children's college funds, and even money needed to support
    their day-to-day lives.
    ---------------------------------------------------------------------------
         \1\ New York State Attorney General, Press Release, ``Attorney
    General James Sues Citibank for Failing To Protect and Reimburse
    Victims of Electronic Fraud'' (Jan. 30, 2024), available at https://
    ag.ny.gov/press-release/2024/attorney-general-james-sues-citibank-
    failing-protect-and-re
    imburse-victims.
         \2\ See Complaint, People of the State of New York v. Citibank,
    No. 1:24-cv-00659 (S.D.N.Y. filed Jan. 30, 2024), available at https://
    ag.ny.gov/sites/default/files/2024-01/citi-complaint.pdf. The New York
    AG also alleges that the unauthorized wire transfers that occurred by
    electronic requests initiated by scammers via online banking or mobile
    app are covered by the EFTA. They are electronic instructions that do
    not come from the actual consumers who are Citi account holders and
    under the EFTA are unauthorized.
    ---------------------------------------------------------------------------
        I have also heard numerous other reports of banks failing
    to reimburse unauthorized wire transfers even if the consumer
    did not agree to any commercially reasonable security
    procedure. Consumers do not have the resources to fight the
    bank in court or arbitration to enforce their right to a
    reimbursement when this occurs.
        UCC Article 4A does not provide a consumer with any
    remedies besides reimbursement of (and possibly interest on)
    the unauthorized wire amount, and the consumer's attorney is
    not entitled to recover attorneys' fees from the bank. As a
    practical matter, it means that a consumer would have to pay
    out of pocket to fight in court or in arbitration just to get
    their money back, while a financial institution with deep
    pockets can afford to fight a claim. As a result, in most cases
    financial institutions will reject a consumer's unauthorized
    wire transfer claim because the consumer cannot afford to fight
    the decision.
        With respect to fraudulently induced wire transfers like
    those in the story you shared above, the UCC provides no
    remedy.
        You asked me what could be done to help steer financial
    institutions to refund unauthorized transactions and ensure
    that funds are returned to customers in a timelier manner. If
    the definition of unauthorized use in the EFTA was amended to
    include fraudulently induced transfers and if the EFTA was
    amended to include bank-to-bank wire transfers, then consumers
    like Ms. Booras would be entitled to timely refunds of
    unauthorized transactions.
        Congress can and should amend the EFTA to address the
    problems of unauthorized consumer bank-to-bank wire transfers
    as well as fraudulently induced consumer bank-to-bank wire
    transfers by:

        Eliminating the exemption for bank wire transfers,
            bringing those transfers within the EFTA and its
            protections against unauthorized transfers and errors;

        Protecting consumers from liability when they are
            defrauded into initiating a transfer; and

        Allowing the consumer's financial institution,
            after crediting the consumer for a fraudulent transfer,
            to be reimbursed by the financial institution that
            allowed the scammer to receive the fraudulent payment.

        The consumer bank-to-bank wire transfer loophole and
    inclusion of fraudulently induced transfers could also be
    addressed by rulemaking or guidance from the CFPB, though
    Congressional action would be faster and less subject to
    challenge.
                                    ------

             RESPONSE TO WRITTEN QUESTION OF SENATOR BRITT
                            FROM PAUL BENDA

    Q.1. As part of the bipartisan Taxpayer First Act of 2019,
    Congress required the Internal Revenue Service (IRS) to
    implement updates to modernize its Income Verification Express
    Service (IVES). The IVES system permits financial services
    providers to submit Form 4506-C to verify a credit applicant's
    income, helping to prevent fraud and ensure accurate
    underwriting.
        On January 2, 2024, the IRS issued a notice that it intends
    to limit the use of the entire IVES system to only mortgage
    loan
    applications. Given that the IVES has been a useful tool in
    combating fraud, including in helping to identify whether a
    credit card applicant is a legitimate person, it seems short-
    sighted to restrict access to this tool for financial
    institutions working to combat fraud. The IRS was directed by
    Congress to modernize the system so that it would no longer be
    fax machine-based and instead could be accessed electronically.
    However, the IRS decided to also limit access to this useful
    system. This is counterintuitive, financial systems should have
    every possible tool at their disposal to fight fraud.
        Could you share your thoughts on this decision by the IRS
    to limit financial services providers' access to a useful and
    effective fraud prevention tool?

    A.1. ABA appreciates your attention to this important matter.
    The use of tax transcripts as a mechanism to obtain income and
    asset information from consumers is crucial to bank efforts on
    multiple fronts, including accurate income verification, fraud
    detection and continued efforts to propel real-time application
    innovation programs that benefit consumers and are desired by
    the industry.
        The Income Verification Express Service (IVES) program
    provides financial institutions direct access to tax
    transcripts and is currently used by consumer and commercial
    lenders and Government agencies such as the Small Business
    Administration (SBA) to confirm the income of a borrower during
    the processing of a loan application. Lenders request tax
    transcripts from borrowers for various reasons:

        Income Verification: Tax transcripts provide an
            official record of the borrower's income, helping
            lenders verify the accuracy of income stated on loan
            applications.

        Accuracy and Consistency: Comparing loan
            application data with tax transcripts ensures income
            consistency and accuracy.

        Fraud Prevention: Tax transcripts aid in detecting
            and preventing income fraud by confirming reported
            income matches IRS records.

        Regulatory Compliance: Obtaining tax transcripts
            may be mandated by regulatory authorities to ensure
            compliance with lending regulations and guidelines.

        Risk Assessment: Reviewing tax transcripts helps
            assess a borrower's financial stability and ability to
            repay loans, indicating consistent income over time.

        A most important benefit of the IVES program is that it
    guarantees direct access to a primary source document--the tax
    transcript--and such access is crucial in validating the
    legitimacy of information received. For instance, IVES will be
    used to verify a consumer's W2 form electronically when making
    a loan, allowing the bank to verify a consumers self-reported
    income. Using primary sources such as IVES serves as a highly
    effective disincentive to fraudulent behavior because: (a)
    applicants cannot access documents that can be potentially
    altered, and (b) bank staff are able to immediately review and
    recognize inconsistencies in documents that are standardized
    and therefore easily reviewed for inconsistencies or defects.
    Our bank operations professionals stress that the absence of
    current abilities to verify tax returns in commercial and
    residential lending originations would affirmatively invite
    illicit actors to commit financial crimes--in short, if
    potential fraudsters know that application submissions cannot
    be verified with primary sources, it will trigger new avenues
    for illicit schemes.
        The most important types of information that would be
    denied to financial institutions if IRS were to limit financial
    services providers' access to IVES include the following:

        Gross Income: The total income reported by the
            taxpayer, including wages, salaries, tips, and other
            sources of income. This information is crucial for
            income verification and assessing the borrower's
            ability to repay the loan.

        Adjusted Gross Income (AGI): AGI represents gross
            income minus specific deductions, providing a more
            accurate reflection of the borrower's financial
            situation. Lenders often use AGI for income
            verification and regulatory compliance purposes.

        Taxable Income: Taxable income is the amount of
            income subject to taxation after deductions and
            exemptions. It helps lenders assess the borrower's
            financial stability and repayment capacity.

        Tax Filing Status: The taxpayer's filing status
            (e.g., single, married filing jointly, married filing
            separately) provides context for interpreting income
            information and ensures regulatory compliance.

        Tax Year: The tax year for which the transcript is
            issued is essential for lenders to match the income
            information with the borrower's application timeline
            and verify recent financial status.

        These are key pieces of information that enable lenders to
    conduct essential income verification, fraud prevention, and
    regulatory compliance checks while still maintaining the
    integrity of the lending process.
                                    ------

             RESPONSE TO WRITTEN QUESTION OF SENATOR BUTLER
                           FROM JOHN BREYAULT

    Q.1. Ann Booras, a teacher from East Bay had $20,000 snatched
    from her by a scammer who called her, pretending to be from her
    bank, Wells Fargo, and claimed to be investigating fraud. She
    was asked to wire $20,000 and $5,000 from her account; the wire
    for transfer for $5,000 was recovered but the larger sum was
    not. Sadly, Ann's story of wiring her hard-earned money to
    criminals is not an isolated one. When she received the scam
    call, her caller ID even said Wells Fargo bank. Ann realized
    what had happened and contacted Wells Fargo, her request for
    reimbursement was denied on the grounds that she had authorized
    the transaction.
        Mr. Breyault, as scammers use technology to fool consumers,
    what are financial institutions doing to inform their customers
    about these scams?

    A.1. Financial institutions typically do try to put in place
    procedures and educational materials to mitigate these scams.
    For
    example, the American Bankers Association has their
    #BanksNeverAskThat campaign. \1\ Many banks also train their
    tellers to spot potential red flags for fraud and put warnings
    on their websites, materials, and payment apps. However, at the
    National Consumers League we have limited insight into the full
    extent of measures banks may take to inform their customers
    about scams.
    ---------------------------------------------------------------------------
         \1\ American Bankers Association. ``ABA and America's Banks Launch
    4th Annual #BanksNeverAskThat Consumer Awareness Campaign'', Press
    release. (October 2, 2023) Online: https://www.aba.com/about-us/press-
    room/press-releases/banksneveraskthat-2023-launch.
    ---------------------------------------------------------------------------
        Consumer education alone will not make a meaningful impact
    in preventing the tens of billions of dollars lost to fraud
    each year. We have found that scammers quickly recognize and
    adapt to the warnings that banks put in place. Many victims
    report that the criminals coached them through the process,
    guiding them to ignore and bypass the banks' advisories. Any
    strategy to eliminate fraud will be ineffective if it relies on
    educational programming while failing to establish incentives
    for financial institutions to implement greater antifraud
    measures. We must stop scams before they can be executed in the
    first place. Banks are the parties in the financial system best
    positioned to accomplish this.
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