Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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August 27, 2018
Who Owns Your ATM?
Counting the number of ATMs in the United States has been a challenge since 1996, when independent operators (nonfinancial institutions) started deploying ATMs/cash dispensers. That was when Visa and MasterCard dropped their prohibition against surcharges. But a recent study sponsored by the National ATM Council largely overcame that challenge while also gathering some interesting results about the locational aspects of the independently owned ATMs compared to machines owned by financial institutions (FI).
The study was conducted earlier this year by a team of economics professors from the Department of Economics and Geography in the University of North Florida's Coggin School of Business. The study's primary objective was to determine whether the locations of independently owned ATMs and FI-owned ATMs were different in terms of demographics and socioeconomic status.
Using a database from Infogroup, the team identified 470,135 ATMs operating in 2016. About 41 percent of these were FI-owned, and the rest were independently owned. The majority of the independent ATMs are in retail establishments, with heavy concentrations in convenience stores, pharmacies, and casual dining locations.
The research team plotted the locations of all the ATMs, overlaying demographic and socioeconomic data they obtained from the U.S. Census Bureau and its American Community Survey. Among the 10 main elements the researchers used were median age, unemployment rate, education level, household income, disposable income, and average home values.
They concluded that the independent ATMs "tend to be located in areas with less population, lower population density, lower median and average income (household and disposable), lower labor force participation rate, less college-educated population, higher unemployment rate and lower home values."
So what does this mean?
Well, it means that the independently owned ATMs are providing a vital service in rural and inner-city areas. Other studies—such as the Federal Reserve's Diary of Consumer Payment Choice—have shown that lower-income households (those earning less than $50,000) use cash as their primary method of payment. Therefore, these independent ATM owners are giving these households access to financial services that would otherwise be limited.
A post from December 2014 highlighted some of the challenges the independent operators were facing. Stand by for a future post that will provide an update on this part of our country's payment ecosystem.
By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
August 20, 2018
With Social Engineering, It Takes Only One
I recently wrote a post about the time I spent job shadowing in my employer's Information Security Department (ISD). One of the main objectives of the job shadow program is to allow ISD to introduce their communication, education, and outreach efforts to employees. This department works constantly to make employees aware of trending security threats, especially social engineering, and they have to do it in a way that gets the employees' attention. Creating a security-aware culture is critical because it takes just one employee, just one time, to cause a significant risk event. ISD has found that if they deliver messages in a fun way—such as an annual chili cook-off—more ears are open to hear them.
The Retail Payments Risk Forum follows social engineering trends closely since social engineering presents a major security risk and it directly affects payments. These attacks can easily open a gateway for criminals to access payment systems or any protected information system. Here's a quick review of social engineering: it relies on manipulating human behaviors through direct or indirect communication, and it does not necessarily involve technology. As computer security grows increasingly sophisticated, some criminals have found it can be easier to manipulate an individual than to game a machine. Some reports say that social engineering schemes have cost U.S. businesses nearly $3 billion since 2013. It's no wonder that social engineering is a growing concern.
A common social engineering attack is phishing, which is when the criminal uses an email that appears to be from a legitimate company to get people to respond with personal information such as account credentials. According to one company's report, phishing and pretexting in 2017 represented 98 percent of social incidents and 93 percent of breaches. (Pretexting often involves a scam whereby one individual lies to get personal information from another individual. A pretexter, for example, might pretend to be conducting a survey.) At 96 percent, email continues to be the most common vector. The good news is that 78 percent of people who were phished last year didn't open a single email, according to the same report.
But the bad news is that, on average, 4 percent of people in any given phishing campaign open an attachment or click a link—and it takes only one person to put a company or even an industry at risk. Does your overall strategy address that 4 percent and have a plan in place for their clicks? The report also found that the more phishing emails someone has clicked, the more they are likely to click in the future.
Psychological manipulation is a powerful tool to try to influence someone to divulge sensitive information. Since social engineer fraudsters need to reel in just one victim, we need to ensure that every single employee hears the message. Promoting security awareness scratches the surface in fighting social engineering, but it needs to be fun and creative constantly.
Look for one more post in this series describing my time in the job shadowing program in my employer's Information Security Department.
By Jessica Washington, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
August 13, 2018
Protecting Our Senior Citizens from Financial Abuse
By all accounts, elder financial abuse appears to be a multi-billion-dollar problem. A 2011 New York State study found that, for every documented case of elder financial exploitation, more than 43 other cases went unreported. A 2015 report from True Link Financial estimates that nearly $17 billion is lost to financial exploitation, defined as the use of misleading or confusing language, often in conjunction with social pressure and tactics, to obtain a senior’s consent to take his or her money. According to the same report, another $6.7 billion is lost to caregiver abuse, which is deceit or theft by someone who has a trusting relationship with the victim, such as a family member, paid caregiver, attorney, or financial manager.
Over the last several months, Risk Forum members have had several conversations with boards and members of different regional payment associations. The topic of elder financial abuse and exploitation came up often. It has been over seven years since Take On Payments last explored the topic, so we are overdue for a post on the subject given both the interest from some of our constituents and new legislation around elder financial abuse recently signed into law.
With an aging baby boomer population representing the fasting growing segment of the population, awareness of the magnitude of elder financial abuse and an understanding of ways to identify and prevent it are critical to the well-being of our senior citizens. And that is exactly the intent of the Senior SAFE Act that on May 24 was passed by Congress and signed into law under Section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Briefly, the act extends immunity from liability to certain individuals employed at financial institutions (and other covered entities) who, in good faith and with reasonable care, disclose the suspected exploitation of a senior citizen to a regulatory or law enforcement agency. The employing financial institutions are also immune from liability with respect to disclosures that these employees make. Before they were afforded immunity, banks and other financial-related institutions had privacy-violation concerns over disclosing financial information to other authorities. The new immunities are contingent on the financial institution developing and conducting employee training related to suspected financial exploitation of a senior citizen. The act also includes guidance regarding the content, timing, and record-keeping requirements of the training.
Massive underreporting of elder financial abuse and exploitation makes it difficult to estimate the amount of money lost. While the law does not require financial institutions to report suspected financial abuse and exploitation, it definitely encourages them to create employee educational programs by offering immunity. And those who know the Risk Forum well know that we are strong advocates of education. Elder financial abuse is a growing problem that must be tackled. How is this law changing your approach to reporting suspected cases of elder financial abuse and related employee education?
By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
August 6, 2018
The FBI Is on the Case
I recently took advantage of a job shadow program in our Information Security Department (ISD). I joked with our chief information security officer that I was ready to "ride along" with his detectives for our own version of the television drama series Crime Scene Investigations (better known as CSI).
All jokes aside, I enjoyed working with ISD as part of the team rather than as an auditor, a role I have played in the past. We spent a good part of the day walking through layered security programs, vulnerability management, and data loss prevention. Underneath these efforts is an important principle for threat management: you can't defend against what you don't know.
Threat investigations absolutely must uncover, enumerate, and prioritize threats in a timely manner. Digging into each vulnerability hinges on information sharing through adaptable reporting mechanisms that allow ISD to react quickly. ISD also greatly depends on knowledge of high-level threat trends and what could be at stake.
It turns out that many payments professionals and law enforcement agencies also spend a large part of their time investigating threats in the payments system. After my job shadowing, I realized even more how important it is for our payments detectives to have access to efficient, modern information-sharing and threat-reporting tools to understand specific threat trends and loss potential.
One such tool is the Internet Crime Complaint Center (IC3). The FBI, which is the lead federal agency for investigating cyberattacks, established the center in May 2000 to receive complaints of internet crime. The mission of the IC3 is two-fold: to provide the public with a reliable and convenient reporting mechanism that captures suspected internet-facilitated criminal activity and to develop effective alliances with industry partners. The agency analyzes and disseminates the information, which contributes to law enforcement work and helps keep the public informed.
The annual IC3 report aggregates and highlights data provided by the general public. The IC3 staff analyze the data to identify trends in internet-facilitated crimes and what those trends may represent. This past year, the most prevalent crime types reported by victims were:
- Personal data breach
The top three crime types with the highest reported losses were:
- Business email compromise
- Confidence/Romance fraud
The report includes threat definitions, how these threats relate to payments businesses, what states are at the highest risk for breaches, and what dollar amounts correspond to each crime type. This is one tool available to uncover, enumerate, and prioritize threats to the payment ecosystem. Do you have other system layers in place to help you start your investigations? If you don't know, it might be time for you to take a "ride along" with your detectives.
By Jessica Washington, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
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- The Range of Un-Friendly Fraud
- Payments Webinar October 10: Cash in the 21st Century
- "Insuring" Ransomware Will Continue to Flourish
- Designing Disclosures to Be Read
- Is There a Generation Gap in Cash Use?
- What the Most Convenient Food Tells Us about Payments
- Is Friction in Payments Always Bad?
- Why Should You Care about PSD2?
- At the Intersection of FinTech and Financial Inclusion
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- account takeovers
- ATM fraud
- bank supervision
- banking regulations
- banks and banking
- card networks
- check fraud
- consumer fraud
- consumer protection
- credit cards
- cross-border wires
- data security
- debit cards
- emerging payments
- financial services
- financial technology
- identity theft
- law enforcement
- mobile banking
- mobile money transfer
- mobile network operator (MNO)
- mobile payments
- money laundering
- money services business (MSB)
- online banking fraud
- online retail
- Payment Services Directive
- payments fraud
- payments innovation
- payments risk
- payments study
- payments systems
- phone fraud
- remotely created checks
- risk management
- Section 1073
- skills gap
- social networks
- third-party service provider
- trusted service manager
- Unfair and Deceptive Acts and Practices (UDAP)
- wire transfer fraud
- workforce development
- workplace fraud