Treasury accuses banks of ‘insufficient data sharing’ on fraud

exist a report from last week In terms of artificial intelligence and cybersecurity, the U.S. Treasury Bank stated that although they tend to share large amounts of information with each other for cybersecurity and anti-money laundering purposes, their practices in the fields of artificial intelligence and cybersecurity “data sharing” Not enough to prevent fraud.

Lack of banks sharing fraud data undermines efforts by smaller banks to train anti-fraud AI models Many banks hope these models will replace rules-based engines, deny lists and device fingerprinting to detect and prevent transaction-related crimes such as money laundering and fraud.

The Treasury Department acknowledged there are widespread gaps in the data financial institutions can use to train various artificial intelligence models, but said the gap was “very significant in the area of ​​fraud,” the report said, linking the fraud area to robust cybersecurity data-sharing prevention efforts. Comparisons were conducted by organizations including: Financial Services Information Sharing and Analysis Center.

“The accuracy of machine learning-based systems in identifying and modeling patterns of fraudulent behavior is directly related to the size, scope (diversity of data sets) and quality of data available to a company,” the report reads.

According to the report, which is based on 42 interviews, “most financial institutions” interviewed expressed the need for better cooperation in the area of ​​fraud, especially because fraudsters themselves have been using artificial intelligence and machine learning technology to prevent .

“The sharing of fraud data will support the development of sophisticated fraud detection tools and better identify emerging trends or risks,” the report said.

However, the report said that while such information sharing could improve fraud detection, it “also raises privacy concerns” because it would involve the collection and storage of sensitive financial information, including transaction history and personal behavior. Data anonymization and algorithmic transparency—helping customers report and understand how their data is used—can alleviate these problems.

The Treasury Department said in the report that the Financial Crimes Enforcement Network, a division of the Treasury Department, may be well-positioned to support fraud information sharing efforts among banks to ensure that smaller financial institutions “benefit from advances in the development of artificial intelligence technologies.” . Fighting Fraud, the Report Says. Core providers can also play this role, the report said.

While many vendors offer AI-based transaction monitoring systems to smaller banks, the Treasury report said banks’ in-house development “has a significant impact on overseeing and controlling model development, testing, transparency and governance, and obtaining adequate model risk data monitoring.” have advantages” for the purpose of management evaluation. “

So far, the report cites the efforts of two organizations already working to close the fraud information-sharing gap: the Bank Policy Institute and the American Bankers Association.

The Bank Policy Institute, a public policy research and advocacy group, told Congress in February that as part of its efforts to promote and enable the sharing of data and intelligence among agencies, it established BITS, a “senior executive program” for bankers. level forum” to collaborate on policy advocacy, increase the resilience of critical infrastructure, enhance cybersecurity and reduce fraud.

The American Bankers Association, a trade organization and banking industry lobbying group, is launching Information sharing and exchange The association said banks will assist members in combating fraud during the first half of this year.

As an example of how exchanges operate, in fraud cases known as business email compromises, the platform will enable banks to send out critical information about suspected fraudsters’ accounts to peers, said Paul Benda, executive vice president of risk, Bank of America. Association of Cybersecurity and Fraud.

“The idea here is to allow banks to share this information among other banks in a near-instant manner, so they can integrate this data into their payment flows, risk scoring systems to stem the flow of funds,” Benda said.

The association said its long-term goal is for the exchange to cover all financial institutions Article 314(b) The Patriot Act gives financial institutions the right to share information that can be used to identify transactions that may involve money laundering or terrorist financing.

As for the consequences of failing to promote adequate sharing of fraud information, several institutions interviewed by the Treasury said that if “smaller financial institutions are not supported to close this critical gap,” there may be “a risk of future consolidation toward larger institutions,” the report said.

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