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Spanning nearly 15 months and "Americans are sick and tired of these scams," said Senator
Elizabeth Warren, D-Mass., one of the authors of the bill.
thousands of pages of documents "Banks and peer-to-peer payment services like Zelle need
and data, the PSI report concluded to be held accountable for the scammers that are operating
on their platform."
that EWS and its three largest bank
owners (JPMorgan, Wells and BofA) Scams are harder to discern

aren't doing enough to protect It's not that FIs are indifferent to scams and other frauds
consumers from the growing risk of on these new instant payment networks, but the potential
for fraud has given some institutions, particularly smaller
scams and fraud on the network. FIs, pause. "Fraud is top of mind for financial institutions,"
Heman Daswani, a principal consultant at Temonos, ex-
plained in an interview.

The U.K.'s experience with fraud on instant payment plat- He noted, however, that their training and experience has
forms "serves as a cautionary tale for the U.S.," Datos In- been with batch processing. (Think ACH and card pay-
sights stated in a recent report. "Fraudsters have demon- ments.) "Financial institutions need to up their games
strated their ability to exploit APP [automated push pay- with technology," Daswani said, adding that the ongoing
ment] and ATO [account takeover] fraud schemes, honing sophistication of fraud actors requires FIs, regulators and
their techniques over years of practice before turning customers to play catch up.
their attention to the U.S. faster payment rails," the report
stated. "Given the larger population and more fragmented Rushiru Gunasena, senior vice president for RTP product
banking landscape in the U.S., the potential for fraudulent management at The Clearing House, suggested more and
activities is significantly greater than in the U.K." better sharing of information between FIs could help with
fraud mitigation. "Sharing and better collaboration would
A recent Mastercard report pointed to account-to-account help put a dent in fraud moving from one network to an-
fraud as a growing problem, not just for financial institu- other," he said.
tions (FIs) but for acquirers and other payments compa-
nies. "There is a growing possibility that acquirers will be The Clearing House is a payments company owned by 20
using A2A at some point and therefore see the potential of the world's largest banks, including many of the same
for problems in their own businesses," the report stated. banks that own Zelle. Most, if not all, Zelle transactions
Lawmakers hone in on the problem clear through RTP.

The Electronic Funds Transfer Act and Regulation E ad- Many scams today are so sophisticated that it's difficult
dress fraud and other problems arising from P2P trans- for consumers to recognize them for what they are, said
actions, requiring FIs to reimburse consumers for unau- Scott Harkey, executive vice president for financial servic-
thorized transactions. What isn't covered are scams where es and payments at the consultancy Endava.
consumers are tricked into sending money to fraudsters.
During a presentation at a virtual summit put on by Unit
EWS has taken the position that it is not technically a FIs 21, Harkey pointed to two trends that are driving up scams:
under the EFTA and Reg E, and thus is not liable to con- greater availability of data to fraudsters and advances in
sumers who are victims of scams or fraud on the Zelle net- artificial intelligence. "It's getting harder for people to de-
work, according to the subcommittee's report. tect what is a con and what is not," he said.

This hasn't set well with lawmakers. In August, a group of Unit 21 is one in a small army of firms that have emerged
House and Senate members introduced legislation titled to address fraud on payment platforms. The company le-
the Protecting Consumers from Payment Scams Act. That verages real-time monitoring and AI-driven investigation
legislation would update the EFTA to clarify specifically tools to block fraudulent transactions in real time, stated
how consumers should be protected from scams and other Ian Macallister, the company's COO.
fraud on P2P networks.
Fraudsters use AI in a variety of ways. One common tech-
The legislation also would require banks and/or networks nique is to impersonate family members or friends and
used to scam consumers to share liability. And it would then ask those individuals for money or personal informa-
classify EWS and other financial services companies that tion. Typically, these scams use AI to manipulate videos
play central roles in facilitating electronic payments as FIs, and recordings found on social media sites to produce re-
and thus subject to the EFTA and Reg E. alistic recordings that sound like panicked relatives ask-
ing for money.

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