Industry Leaders Outline Fraud-Fighting Techniques to U.S. Senate (Nov. 20, 2014)
Prepaid industry leaders, which included representatives from InComm, Blackhawk Network and Green Dot, met with members of the U.S. Senate Special Committee on Aging during a hearing yesterday to outline how they’re working to prevent fraudsters from using prepaid debit cards to swindle consumers, particularly phone scams perpetrated against the elderly.
One of the biggest issues the prepaid industry faces is the prevention of victim-assisted fraud, which is difficult to detect and eliminate because it relies on legitimate customers being deceived into using a reload network to unwittingly send money to a criminal,” said Skeet Rolling, chief operating officer at InComm affiliate ITCFL. The fraud typically takes the form of offering free money from lottery winnings or qualifying for a loan, for example.
“InComm and ITCFL take our responsibility to our consumers very seriously [and] ITCFL has over 60 employees dedicated to compliance, anti-money laundering and fraud prevention,” Rolling said in his testimony. “We have invested significant time and resources since we launched Vanilla Reload [Network] to develop and institute best practices to warn consumers about the dangers of victim-assisted fraud and to monitor, spot and stop this fraud.”
In addition to training clerks to warn customers prior to purchase, placing warnings on Websites and creating a blog used to educate consumers about GPR use and potential scams, InComm has eliminated ATM cash access on its GPR card products in countries where large volumes of fraud are observed. Perhaps most importantly, according to Rolling, InComm developed swipe reload technology enabling customers to swipe a GPR prepaid card at the POS to facilitate the reload transaction. The process is more convenient for customers, but also eliminates victim-assisted reload fraud by preventing cash from being transferred via use of a PIN. Only the person holding the card can load funds.
“Our research indicates that less than 1 percent of transactions involving [Blackhawk Network] Reloadit packs constitute potential fraud,” said Blackhawk CEO William Tauscher in his testimony. “Nevertheless, Blackhawk is committed to preventing all instances of fraud against consumers and, accordingly, has implemented significant measures to prevent and mitigate different types of fraud, including victim-assisted fraud.”
Blackhawk’s anti-fraud efforts include monitoring GPR card and Reloadit pack activations and transactions using Blackhawk data and sophisticated AML and fraud-detection software, 24-hour risk management resources and risk-based funding delays; educating and training retail partners and their employees about fraud; ensuring consumer awareness of fraud threats; and coordinating with law enforcement and regulatory agencies.
Steve Streit, CEO, Green Dot Corp., testified that victim assisted fraud represented approximately $30 million in cash loads in 2013 out of total load volume through Green Dot’s network of approximately $20 billion—or less than one-fourth of 1 percent of loads. “While this amount of fraud is not material in statistical terms, Green Dot recognizes that it is certainly material to the senior who fell victim to the confidence scam,” he added.
Green Dot has spent millions of dollars on initiatives to combat this type of fraud, including technology to identify potentially fraudulent transactions and blocking the PIN before the fraud can be completed; employing methods to quickly track the flow of funds after being notified by a victim, enabling Green Dot to attempt to block and recover funds for the victim, and to provide law enforcement with detailed information on the scammer; blocking cash withdrawals on its Green Dot Bank-issued debit cards at ATM machines outside the U.S.; and reprinting and distributing all MoneyPak packaging with large red warning notices where the PIN is located, urging consumers to never give out their secret PIN number.
Green Dot also has decided to discontinue the PIN method of reloading a card, moving to a more modern and more fraud-resistant “card swipe” reload process. The company announced last July that the MoneyPak PIN product will be out the market by the first quarter of 2015.
The NBPCA also submitted a letter to the committee outlining steps the association’s members are taking to combat fraud. “Our members did a great job explaining all the things they do, all the resources they dedicate to solving this problem,” Brian Tate, NBPCA director of government relations, tells Paybefore. “It’s an ongoing issue because fraudsters are always going to be looking for new and innovative ways to use technology to commit fraud, but our members are right up with them and doing everything they can to mitigate it.”
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