State Banking Regulators Call for Improvements in Combating Payments Fraud
The Conference of State Bank Supervisors ("CSBS") and the National Association of State Credit Union Supervisors ("NASCUS", and together with CSBS, the "Associations") called on federal banking regulators to strengthen defenses against payments fraud.
In a joint letter responding to the OCC, Federal Reserve, and FDIC’s (collectively, the "Banking Agencies") request for information regarding potential actions to address payments fraud, the Associations warned that fraud schemes—particularly check fraud—are increasingly sophisticated and cross regulatory and international jurisdictions, requiring coordinated responses from state and federal regulators. The Associations emphasized that financial institutions face challenges balancing consumer protection, operational realities, and regulatory obligations under existing frameworks such as Regulation CC ("Availability Of Funds And Collection Of Checks") and the USA PATRIOT Act’s information-sharing provisions.
The Associations recommended, among other things, that the Banking Agencies:
- Expand Interagency Collaboration. The Associations urged regulators to leverage existing Federal Financial Institutions Examination Council work and establish public-private partnerships with law enforcement, FinCEN, banks, credit unions, and other relevant stakeholders. They said this would speed detection of new fraud schemes, strengthen coordinated responses from government and industry, and potentially provide more timely supervisory guidance.
- Clarify Regulation CC Guidance. The Associations called on the agencies to provide clearer direction on how institutions can meet the "burden of necessity" for extended check-hold times under Regulation CC. They noted that state-level laws already allow for longer holds in cases of suspected fraud and argued that federal guidance should support similar flexibility while ensuring consumer protections.
- Improve Data Sharing Frameworks. The Associations emphasized that FinCEN should streamline the information-sharing process under Section 314(b) of the USA PATRIOT Act. More specifically, they said that the current process for sharing Section 314(b) information is too cumbersome to be effective in combating rapidly evolving fraud schemes. The Associations stressed that faster, easier data sharing across institutions is essential to prevent losses and protect consumers.