Frank Takes: Scam Interdiction. Banks Battle Scams with Tough Love

Frank Takes is a quick summary of insights and findings from the popular industry blog Frank on Fraud, written by renowned fraud expert Frank McKenna, co-founder and Chief Fraud Strategist at Point Predictive.

Banks around the world are adopting a proactive approach called Scam Interdiction to combat scams. Instead of merely reimbursing victims, they are declining or pausing high-risk transactions to prevent scams from happening in the first place.

The Old Fraud Fighter Playbook
This approach mirrors the success of FICO Falcon in the 1990s, which used AI to decline suspicious card transactions before approval, reducing card fraud losses by 70%. Now, banks are reviving this strategy to address the current surge in scams.

Australia’s Sand in the Gears Approach
Australian banks are implementing measures to slow down instant payments, blocking high-risk crypto transactions, and holding payments for 24-48 hours to thwart scams. This contrasts with the UK’s reimbursement model, which Australian banks view as a “honeypot” for scammers.

AI Interdiction in the UK
In the UK, banks like Revolut are using AI to detect and block scam payments before they are completed. Revolut’s new AI feature identifies high-risk transactions and stops them, preventing further fraudulent activity. This approach has led to a 30% reduction in scam losses, particularly in investment scams.

A Tough Love Approach
Scam Interdiction is likened to a tough-love approach, where banks protect customers by declining high-risk transactions, even if it means facing backlash from customers. This method aims to break the “spell” scammers cast on their victims, preventing significant financial losses.

Challenges and Inevitable Adoption
While declining transactions that involve customers’ money presents challenges, Scam Interdiction is becoming necessary as regulators push for banks to reimburse scam victims. To balance this, banks must block high-risk payments to protect their bottom line and reduce overall scam losses.

Emergence of Break the Spell Teams
“Break the Spell Teams” are being formed within US banks to pause money movement and assess transactions during Scam Interdiction. This trend is expected to grow, with significant investment and innovation in this area over the next 24 months.

Please note that any opinions expressed in this piece are solely those of the individual author and do not necessarily reflect the views or opinions of the company. For the full article, visit Frank on Fraud.