Money out the Door Automated Ones
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FRIDAY JUNE 4, 2021 VOL. 186 No. 106 AMERICANBANKER.COM Follow us on Twitter @AmerBanker streamline payment acceptance and cut costs by replacing manual processes with Money out the door automated ones. Page 6 Ally ditches overdraft fees, Financial institutions' lending portfolios are expected to 6 citing consumer harm take a steadily bigger hit from synthetic identity fraud over The online bank’s decision to stop charging the next few years the fees is part of a broader reassessment across the industry. Ally had waived See story on page 2 overdraft fees early in the pandemic and has historically been less reliant on them than Unsecured credit losses due to SIF many other institutions. Page 7 $2.5B OCC not reviewing Trump-era ‘valid when $2.4B 7 $2B $2.2B made’ rule, Hsu says $2.0B The acting comptroller of the currency, $1.8B appointed by the Biden administration, $1.5B $1.6B signaled that the regulation meant to provide legal clarity about the secondary market is $1B safe for the time being. Page 7 $500M First Bancorp buying 2019 2020* 2021* 2022*2023* 8 Select Bancorp to bulk up in North Carolina Source: Aite Group (*projected) Acquiring its local rival would give First Bank a commanding presence in Fayetteville and add to its presence in Raleigh, Charlotte and Wilmington. Page 8 Investors flock to bank dailybriefing 3 stocks, anticipating Bank of America fixes higher interest rates 9 ordered after hacked How Fed aims to help banks Rising inflation could lead to a rate hike, customers ‘go hungry’ 1 spot synthetic identity fraud bolstering lenders’ profits in 2022. Improved Bank of America was ordered by a judge Scams in which a real person’s information credit quality and an economic rebound are to change its practices after thousands of is used to create fictitious businesses or also fueling investment in the sector. Page 4 unemployed California customers receiving individuals have led to $6 billion in credit public benefits complained that when their losses. The Federal Reserve has developed Where banks are eyeing prepaid debit cards were hacked, the bank a standard definition for synthetic identity 4 profits in the green economy made matters worse by treating them like fraud so lenders can distinguish it from While the industry is facing greater pressure criminals. Page 8 traditional identity theft. to scrutinize the environmental risks (See chart above.) Page 2 associated with its financing activities, many The era of virtual board banks also sense opportunities in climate 10 meetings needs to end Fed’s Beige Book reports change. Here are some examples. Page 5 High-tech videoconferencing is no 2 pickup in recovery, price replacement for high-touch in-person pressures How open banking meetings. Yet some bank directors who The pace of the U.S. recovery picked up 5 is transforming financial are vaccinated remain hesitant to return to somewhat in the past two months, sparking services in Europe boardrooms, Kenneth H. Thomas writes in price pressures as businesses contended EU regulation permits digital connections BankThink. Page 9 with worker scarcity and rising costs, the between banks and fintechs, creating ways Federal Reserve said. Page 3 for pension providers and brokerages to FRIDAY JUNE 4, 2021 AMERICANBANKER.COM PAGE 2 identity fraud began to catch the attention of windmills, you are collectively not going to do IDENTITY THEFT Fed officials in 2018, said Jim Cunha, senior a very good job at combating the problem.” vice president for secure payments at the Some of the more recent high-profile cases Federal Reserve Bank of Boston. of synthetic identity fraud involved bad actors How Fed aims “Synthetic identity came in as something creating fake businesses to steal from the PPP that appeared to be growing dramatically,” he and other government-backed programs. to help banks said. “We felt like this was an area where the In November, the Department of Justice Fed, as a leader catalyst, could provide value.” announced indictments related to an alleged Although there is scant and varying data Los Angeles fraud ring. Prosecutors said spot synthetic on synthetic identity fraud, the associated defendants used fake, stolen, or synthetic losses for banks are generally expected to identities as part of a scheme to seek identity fraud climb. Aite Group has estimated that by 2023, COVID-19 relief through the Small Business synthetic identity fraud could account for Administration’s Economic Injury Disaster By Hannah Lang $2.42 billion in unsecured credit losses, up Loan program and the PPP. June 02, 2021 from approximately $1.63 billion in 2019. In August, federal prosecutors in Florida WASHINGTON — The Federal Reserve Officials said part of the Fed’s aim is to charged two men with a bank fraud conspiracy has embarked on a multipronged effort to highlight the risk of fraudsters creating fake for allegedly using about 700 synthetic alert financial institutions about the threat businesses, instead of just fake individuals, identities to steal more than $3 million in PPP of synthetic identity fraud, which has already that then try to apply for credit. relief. Last month, ProPublica reported on cost lenders an estimated $6 billion in losses “Our definition is sort of precise, in that it PPP loans that were made by Kabbage and and drained resources from the Paycheck talks about personally identifiable information, other lenders to fake businesses, including Protection Program. and it talks about an individual and an entity,” nonexistent farms. In all, the investigative Some analysts say fraud committed by said Mike Timoney, vice president of secure news organization found that 378 small loans creating fake personas is now the fastest- payments at the Boston Fed. “Most of what we were made to bogus businesses, totaling $7 growing crime in the U.S. However, defining saw in original definitions was really focused million. and identifying synthetic identity fraud has around an identity, but it really didn’t take into Yet the Fed has noted challenges in tracking proved challenging for risk managers and the side that it could be a business or an entity synthetic identity fraud because in some cases law enforcement that historically have been that actually has a fake identity as well.” it is hard to tell it apart from more standard more focused on stopping fraud from more The Fed’s definition helped move synthetic identity theft. traditional identity theft. identity fraud from an “amorphous concept” “It is often difficult to differentiate synthetic After publishing three white papers on to something concrete, said Jason Kratovil, identity payments fraud from traditional the topic, the Fed in September launched a the executive director of the Consumer First identity payments fraud and legitimate focus group of 12 industry experts to agree Coalition. financial activities,” the Fed said in a July 2019 on a standard definition for synthetic identity “Even those who knew about it and were paper. “As a result, subject matter experts fraud. In April, the group defined it as the use paying attention to it and trying to do things indicate that the number and volume of of a combination of personally identifiable to stop it were not defining and approaching synthetic identities in financial portfolios are information to fabricate a person or entity in it and looking for it the same way,” he said. underestimated.” order to commit a dishonest act for personal “If everybody is tilting at slightly different A paper released last year discussed or financial gain. The idea is to focus bankers’ efforts on flagging instances of fraud that are distinct Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 from the more garden-variety instances of Phone 212-803-8200 AmericanBanker.com when a person steals another’s identity. One common approach by synthetic fraudsters Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 is to create a fake persona with a made-up Managing Editor Dean Anason 770.621.9935 name and address that are combined with Reporters/Producers someone’s actual social security number, Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 often stolen through a data breach. Washington Bureau Chief Joe Adler 571.403.3832 “It’s a fantastic first step,” Greg Woolf, a Executive Editor, Technology Miriam Cross 571.403.3834 member of the working group and CEO of the Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 fraud detection software provider FiVerity, said BankThink Editor Rachel Witkowski 571.403.3857 of the standardized effort to define synthetic John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 identity fraud. “The definition is a start, and as Hannah Lang 571.403.3855 this unfolds, the Fed is looking to educate the Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 market and implement this in a way that will Digital Managing Editor help the financial industry.” Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 Growth in criminals committing synthetic For up to date and complete coverage go to AmericanBanker.com FRIDAY JUNE 4, 2021 AMERICANBANKER.COM PAGE 3 the advantages of developing a common the system to perform real-time checks of a Reserve said. definition for synthetic identity fraud. customer’s social security number, name and “The national economy expanded at a “We recently spoke with a credit union date of birth, which Kratovil argues could be moderate pace from early April to late May, a about its machine learning tool developed for useful in combating synthetic identity fraud.