Intelligence Report | November 2026 - Flipbook - Page 6
“It doesn’t matter the size
or sophistication of your
bank anymore. Everyone is
a target.”
diction of local law enforcement. On top of that, local police
Kristina Schaefer, Dacotah Banks
may not have the time or resources to devote to a fraud
case, unless a significant amount of money is stolen or other
crimes are involved.
Other times, victims may be reluctant to step forward
account,” she adds. “[W]e really wanted to take as much of a
and admit what happened. This could be especially true if
proactive approach as we could.”
the fraud started as a scam that is embarrassing to the individual. Fraud is when a customer’s account is accessed by
The Challenges With Fighting Fraud
an unauthorized individual and money is stolen. The victim
There are several issues that make it harder for banks to
normally doesn’t realize the account has been accessed until
successfully fight fraud. First, much of it may start on anoth-
money is missing. Scams are generally a form of fraud and
er platform that is unrelated to the industry. The fraudster
can lead to monetary losses to the victim. In these situations,
attempting to sell nonexistent concert tickets on Facebook
the victim has been tricked out of their funds or manipulated
to Schaefer is a good example of this. Banks have little-to-
into giving up their account information.
no say in how the social media giant Meta runs Facebook
In cases where a consumer directly authorizes a trans-
Marketplace. “We have seen that banks control the things
action to a criminal, then the bank isn’t required to replace
within their ability to control but the ecosystem is much
those funds under Reg E. However, if the consumer is tricked
broader than that,” says Brian Fritzsche, associate general
into providing their account access information to a fraud-
counsel at the Consumer Bankers Association, a banking
ster, and the criminal uses that information to initiate an
trade group. “Fraud doesn’t just live in one sector. We really
electronic funds transfer from the consumer’s account, the
need a whole society approach to fighting fraud.”
bank can be on the hook for the unauthorized activity.
Certain regulations also mean that banks are frequently
Meyer has experienced firsthand how closely linked fraud
on the hook for mistakes that consumers, in particular, make.
and scams can be. Several years ago, while he was traveling
The Electronic Fund Transfer Act, which is implemented
abroad with a friend, his credit card company called to ask
through Regulation E, “protects consumers when they use
him if he had signed up for a membership to a Christian dat-
electronic fund and remittance transfers,” according to the
ing website. At the same time, his friend was signed up for a
Consumer Financial Protection Bureau. This covers ATM
different dating website. Meyer believes they must have used
withdrawals, direct deposits, overdrafts and more.
an ATM that had been corrupted by criminals to steal their
But Regulation E also means that institutions are often
required to reimburse funds consumers lose to fraud and
card information.
“Why a dating website? They were probably going to cat-
unauthorized transactions, Kalahurka says. That’s even true
fish someone,” he speculates, noting that it would be hard to
if the consumer makes an avoidable mistake, such as losing
catch the fraudsters given that they had used stolen informa-
their debit card after writing their PIN number on it only
tion to sign up for the dating profiles. “Sometimes they use
for a thief to find it and withdraw money from the account.
bad information to do other bad things.”
There is no legal recourse for the bank in these instances.
“Banks are also not permitted to ask consumers to waive
All of this is to say that banks must be highly vigilant
right now as fraud increases, and technology creates more
their Regulation E protections in deposit agreements,” she
avenues for potential victims. “Everyone has to be worried
adds. “What if the consumer is negligent? They are still not
about fraud,” Schaefer says. “It doesn’t matter the size or
responsible.”
sophistication of your bank anymore. Everyone is a target.”
Finally, experts agree that law enforcement often is
not able to catch those responsible for fraud. That’s partly
because the fraud could be originating outside of the juris-
4 | BANK DIRECTOR INTELLIGENCE REPORT
Jackie Stewart is executive editor for Bank Director.
