ABA Offers Congressional Testimony on Tools and Techniques to Combat Fraud

Today the American Bankers Association offered the banking industry’s perspective on tools and techniques to combat fraud in testimony before the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions. Darrin McLaughlin, executive vice president and chief BSA/AML & sanctions officer for Flagstar Bank, testified on behalf of ABA. McLaughlin, based in New York City, has worked in anti-money laundering compliance for 21 years. 

McLaughlin testified that despite the banking industry’s significant effort and investment in fraud prevention tools, bad actors continue to target American consumers. Bankrate’s latest Financial Fraud Survey found that about one in three adults have experienced a financial fraud or scam in just the last 12 months, while nearly two in five among them have experienced a financial loss. 

McLaughlin emphasized the need for others, in both the public and private sectors, to join banks in addressing this critically important issue.

“Banks strive to follow all applicable BSA and compliance rules, educate our customers, train our employees, and invest in sensitive detection and compliance systems,” he said. “But banks are in a difficult position with only limited tools to address this growing problem. The federal government and other private sector industries, including telecommunications and social media, must do their part. Combating fraud requires a whole-of-government approach, partnered with the private sector.”

McLaughlin outlined key changes needed to optimize bank efforts to combat fraud, including more actionable feedback from the government on priority threats. 

“Banks need information only the government can provide to stay abreast of changes,” he said. “Banks also need feedback about whether banks’ BSA reporting is highly useful to the government to detect fraud, financial crime, and counter terrorism funding. ABA has called for this feedback, and for bank regulators, FinCEN and government agencies to work together to ensure regional federal law enforcement priorities and trends are shared with banks, while encouraging state and local law enforcement to do the same.”

McLaughlin called for regulatory reforms that would allow for a true risk-based approach to bank anti-fraud efforts, rather than check-the-box compliance obligations.

“Regulatory improvements would help banks better protect their customers,” he said. “Congress has reformed BSA laws, but we need further action by FinCEN and the banking agencies to amend the BSA rules. These regulatory changes would be consistent with this administration’s directive to clarify regulatory expectations and reduce regulatory burden on businesses, and they would allow banks to focus on critical anti-fraud work.”

Read the full testimony.