BITS Tackles Bank Fraud

Fraud Trends Showcase Need for More Education

Diane Ness, the new head of fraud-reduction programs at BITS, the technology division of the Financial Services Roundtable, says 2012 will be a year of more collaboration and communication among financial institutions about emerging threats.

Ness, who comes to BITS from the Consumer Financial Protection Bureau, says her new role is to "keep my ear to the ground and seek out ways that we can be more proactive in communicating fraud trends to our members and helping them mitigate their losses."

During an interview with BankInfoSecurity's Tracy Kitten (transcript below), Ness says she plans to help BITS members communicate the importance of fraud reduction to and with senior management teams, through white papers, advisories and law enforcement.

With fraud and security lines being blurred by data breaches and identity theft, Ness says BITS must explore new ways to make security and fraud-prevention teams stronger partners.

More collaboration with law enforcement and subject matter experts also will play essential roles in identifying fraud trends and prescribing effective measures to prevent and mitigate fraud.

During this interview, Ness discusses:

  • Measures banks must implement to ensure bank customers, often the weakest security links in the financial chain, are taking precautions to mitigate known risks;
  • The role BITS can play in education, not just for banks but for the industry; and
  • Why paying attention to fraud trends, especially where phishing, identity theft and data breaches are concerned, will be critical.

Ness is the vice president of fraud reduction for BITS. She brings 27 years of experience to her post, including special attention to fraud prevention, investigation and remediation for companies and consumers. Before joining BITS, Ness served as a consumer response investigator for the Consumer Financial Protection. She also worked as an investigation specialist at the Federal Deposit Insurance Corp. and held investigations positions with Fifth Third Bank and Key Bank.

TRACY KITTEN: Before we jump into some specific questions about your role at BITS, can you tell our audience a bit about your background, especially as it relates to your most recent post with the Consumer Protection Bureau?

DIANE NESS: I have 25 years in financial fraud investigations, and in 2008, I decided to leave banking and go into my own business. Unfortunately, my timing was very bad with the crisis. So I ended up getting on with the FDIC and closing several financial institutions, which was very interesting work, and through that work, I transferred into CFPB [Consumer Financial Protection Bureau]. At CFPB, I worked in the consumer response area, and that area is the area that takes the actual complaints from consumers. It was another very interesting role. It was great to be in a start-up, and to be a part of a new regulatory agency that opened up.

Greatest Fraud Threats

KITTEN: In what areas do you see the greatest fraud threats where financial security is concerned? And maybe bringing in some of your consumer experience would be helpful here.

NESS: It's really kind of interesting because what I have found is everything old is new again. Some of the old scams are still happening. A lot of checks, counterfeit checks and those types of things, and consumers are still falling victim to that. But there are some things going on that maybe hadn't been quite so top-of-line. One of them is IRS tax refund fraud, which really took a jump this year. Another is child ID theft, and what I'm finding too - kind of getting back up to speed - is the threats of insider fraud are so great, and it seems like the losses are even higher. Security professionals have their work cut out for them. You always want to think that one thing will drop off the radar if a new trend comes, but unfortunately, that's just not happening.

Role at BITS

KITTEN: What will your role be at BITS? How will you bring some of your experience into this position?

NESS: I really want to use my experience in the industry to help our members. In the fraud industry, we tend to react to things. And I consider it my responsibility to keep my ear to the ground and seek out ways that we can be more proactive in communicating fraud trends to our members and helping them mitigate their losses. I also want to help our BITS members communicate the importance of fraud reduction to their senior management teams, which can be by white paper, by advisories, working with law enforcement - help them understand and be able to communicate how important fraud reduction is to senior management.

And as we all know, the fraud and security lines are really getting blurred with data breaches and ID theft. I want to help our members explore ways that security and fraud can be better business partners. That's really what we did at Fifth Third with our information security awareness team and our fraud education team working together. It was a really successful partnership, so I'd like to bring that experience to help our members be able to do the same, and to be more proactive and productive.

Steps to Reduce Fraud

KITTEN: How do you expect to work with financial institutions to help them reduce fraud, as well as the loss associated with fraud?

NESS: Really taking a deep look into the trends that are going on, really talking to people, finding the trends, finding the things that are happening, talking to law enforcement, and really utilizing a large network of former colleagues and subject matter experts to our former members, even just people in the industry that really know and have subject matter expertise that can help us.

Consumer Risks

KITTEN: You bring consumer perspective to the table, which we noted earlier. What can you tell us about some of the more pressing consumer risks that are linked to consumer fraud?

NESS: I was really surprised when I was at CFPB at how much consumers really need to be educated about falling for scams and things. It was really sad to see how many people were still getting ripped off by work-from-home schemes and telemarketing schemes, and that type of thing - just trying to get the word out. They've always done a great job, I think, at educating our consumers, but I think that whole area still needs to happen, and it's amazing again how many consumers just don't understand that if something is too good to be true, it really is too good.

KITTEN: One of the areas that we talk about quite a bit in the industry, and this relates to some of the vulnerabilities that we see on the consumer side, is the advent of socially engineered schemes, such as phishing and vishing, and it's getting a lot of attention. What are you hearing about socially engineered schemes and what steps do you expect BITS to take over the course of the next year or so to help banks address those schemes?

NESS: Like I said, I'm new to the role. I'm still kind of getting up to speed on a lot of those types of things. But from a BITS standpoint, we need to be very proactive. We need to make sure we're communicating with our members and helping them understand some of the new technologies that are going to be coming down the pipe for trying to catch some of these different types of scams.

Role of Education

KITTEN: Now you talked a little bit about the critical role that consumer education plays, and I wonder if you can speak to the role that customer education plays when it comes to commercial banking.

NESS: It's just as big in commercial banking as it is anywhere else. In fact, sometimes it's even more important that the people know not to click on the e-mail that comes to them, and really understand the risks that they're taking against the businesses. Education is important there as well.

KITTEN: Before we close, are there any final thoughts or recommendations that you'd like to leave our audience with?

NESS: The common theme is make sure that you're not reacting, that you're out there, proactively, trying to determine what's going to hit next. Make sure you're communicating with your senior management teams and make sure that they understand the importance of your role. And education - education internally and education for consumers and customers is vitally important in this day and age.

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