By Greg Manship, Senior Vice President of Sales

Surge of Wire Fraud Scams Hurt Consumers and Financial Institutions

In today’s interconnected digital landscape, the rapidly increasing prevalence of wire fraud and Authorized Push Payment (APP) scams present a significant risk to consumers and financial institutions alike. These malicious activities not only erode trust in the financial system but also result in substantial financial losses for unsuspecting individuals.

Wire fraudsters often employ sophisticated tactics, posing as trusted entities to deceive consumers into divulging sensitive information or initiating unauthorized transactions. The repercussions of such fraudulent schemes extend far beyond monetary loss, often causing irreparable harm to victims’ financial well-being and overall sense of security. As the frequency and complexity of these attacks continue to escalate, the imperative for proactive measures to mitigate risk and protect consumers becomes ever more pressing.

In 2021, the Consumer Financial Protection Bureau (CFPB) added their interpretation of Regulation E adding person to person payments (P2P) to the scope of coverage in the FAQs. Wire payments are not covered payment types under Regulation E. Since before the CFPB interpretation of the Electronic Funds Transfer rules (EFT), discussions have occurred about protecting consumers further from losses from EFTs transferred to the account of a fraudster or money mover. Banks have worked to try to step up and help protect consumers without regulation. The European Union passed legislation to require banks to split the liability between sending and receiving institutions starting in October of 2024.

US Senate Banking Committee Urges Action

Last week, the US government appeared to take further steps in the direction of liability shifts.  On April 18, Chairman of the Senate Committee on Banking, Housing and Urban Affairs, Senator Sherrod Brown, along with Senator Jack Reed, sent letters to the top four US banks—Chase, Bank of America, Citi, and Wells Fargo—urging them to take action to protect their customers from wire fraud. According to the letter and an exclusive report by CBS News, consumers lost more than $10 billion dollars in 2023 to these types of frauds, representing a 14% increase over the previous year.

These frauds often have a life-altering effect on the victims. Many individuals have lost tens of thousands of dollars to fraudsters falsely posing as their bank’s representatives to obtain one-time security codes, which are then used by the fraudsters to complete large wire transfers. Since these payments are considered “verified” by bank processes with security codes, customers face challenges disputing the fraudulent activity.

The US Senators emphasized, “Consumers use wire transfers to send large dollar amounts, often to purchase a home or make significant investments, meaning wire fraud is often a life-changing event that can wipe out consumers’ savings or irreparably damage their finances.” They further stated, “Banks have a responsibility to proactively monitor and prevent unauthorized and fraudulently induced transactions. We believe banks should reimburse their customers when they fail to meet these obligations…. With improved fraud prevention and reimbursement practices, consumers would no longer be left on the hook to the tune of billions of dollars annually.”

Earlier in the year, the Senators also sent letters to Early Warning’s Zelle, PayPal’s transfer service Venmo, and CashApp highlighting the committee’s focus on protecting consumers from scams and fraudsters, urging companies to enhance protections and reimburse customers affected by such scams.

Current OTP Authentication Methods Don’t Safeguard Banks and Consumers

It’s evident that one-time passcodes are insufficient in safeguarding consumers from these fraud attacks. Organizations must establish effective controls that balance consumer protection with convenience. Further, while some institutions have resorted to requiring in-branch authorization for payments, this approach is increasingly impractical in today’s digital landscape. Biometric authentication in the cloud remains one of the few methods capable of ensuring that the consumer authorizes a payment securely.

authID Secures FinServ from Wire Transfer Fraud

authID FinServ and banking customers have successfully leveraged the company’s biometric identity solutions to help eliminate such fraudulent activities and losses for their customers. By implementing credentialed identity processes and utilizing biometric faceprints to access bank systems and authorize payments, organizations have significantly reduced these losses. authID has pioneered the development of effective, secure identity verification and user authentication solutions that are user-friendly and simple, thereby paving the way for a more secure payment system.

Our biometric identity verification streamlines digital customer onboarding with the secure identity assurance that enables you to establish trust with your customers following the Customer Identification Program (CIP) process. Through automated authentication of 13,000+ US and international government-issued ID documents, thwarting of deepfakes, injection attacks and presentation attacks with PAD (Presentation Attack Detection) Level 2 accuracy, and biometric matching of a selfie to the credential photo, authID delivers a strong biometric root of trusted identity that binds a user’s proofed identity to their account.

With authID’s biometric authentication, customers can be re-authenticated quickly using biometric facial matching technology, ensuring that the right person is making the transfer or account reset request. With a quick selfie captured in any browser using any desktop or mobile device and a market-leading 700 milliseconds biometric processing, authID eliminates the risks of easily hacked one-time PINS and passwords. authID ensures you always Know Who’s Behind the Device, while keeping the enterprise safe from AI-driven deepfakes, phishing and account takeover.

Contact us today to discover how our biometric solutions can help minimize your payment risk and prevent losses from scams and fraudsters targeting your customers.