Shohei Ohtahi interpreter scandal just one pitch in global game of bank ID fraud

Many will see the story of baseball superstar Shohei Ohtani and the interpreter who embezzled millions from him to pay off gambling debts as a cautionary tale about sports betting. But it is equally potent as a reminder of the ever-present risk of financial fraud, and the increasing role that identity verification plays in preventing it.

In this case, Ohtani’s interpreter, Ippei Mizuhara, is a real person who had access to Ohtani’s finances and admitted to stealing US$16 million from his boss to cover his betting losses. Mizuhara was able to change settings on Ohtani’s bank accounts to redirect alerts, and – because he was so familiar was Ohtahi’s speech – impersonated the player to get the bank to approve large transactions.

A biometric identity verification safeguard on the baseball star’s accounts might have prevented the theft. However, developments in generative AI and deepfake technology are constantly adding new layers to a threat ecosystem that has already poked significant holes in global data security. If it is difficult to put complete trust in a real human individual, imagine how much harder it will be to trust virtual humans knowing they may have been generated expressly to commit bank fraud and other financial crimes.

Banks have biometric tools needed to stem ID fraud

The Shohei Ohtani story may get the headlines. But according to Brett Beranek, general manager of security and biometrics at Microsoft, it is the tip of a much larger iceberg that has crashed into the lives of millions of people, causing financial ruin – and worse.

“Children, grandchildren, spouses, friends, business associates and other individuals that have a close personal relationship with victims are often the culprits of the most heart-wrenching fraud cases,” writes Beranek in a post for LinkedIn. “Victims often feel a sense of shame that someone so close to them could be so evil, and they don’t want the public to know of the fraudsters’ misdeeds.” This can lead to depression, and even suicide.

“This human suffering is completely avoidable,” says Beranek. “Financial institutions have access to biometric technology that would allow them to validate that the human being performing any given transaction is indeed their customer.” Despite having had access to biometric safeguards for years, Beranek says, “many financial institutions don’t have these biometric controls in place, and those that do often have them in select areas of their operations, meaning that not all high-risk financial transactions are secured.”

Bank balances safeguards with customer needs

A podcast produced by the Digital Identification and Authentication Council of Canada (DIACC) focused on using the foundations of the financial ecosystem to fight human trafficking, but took a detour into financial fraud.

Speaking on “Trust Talks and Digital Dives”, Karan Puri, associate vice president at TD Bank’s external ecosystem focused on trusted credentials, says that customer identification is “the single most critical aspect” in safeguarding financial ecosystems, “whether it’s for onboarding a new-TO-bank customer or serving a customer with a high value transaction or to avail services and products within the TD umbrella.”

“Banks ensure that clients are genuinely who they claim to be, and that KYC requirements are met. In doing so, there are oftentimes stringent identification processes introduced, which in turn increase the friction points for criminals.” But Puri emphasizes the need to balance stringency with customer experience. “TD Bank is heavily investing in technology and automation to balance the competing interests of tracking criminal actors in the ecosystem, while reducing the friction for genuine customers.”

FinCEN wants details on IDV, anti-fraud tech for FIs

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a request for information (RFI) “related to existing requirements for banks under the Customer Identification Program (CIP) Rule to collect a taxpayer identification number (TIN) from a customer prior to opening an account.” In other words, the organization is looking for digital identity verification tools that will enable it to keep up with the technological evolution of fraud tactics.

“The requirement for banks to collect identifying information from a customer prior to opening an account has been a long-standing component of a bank’s anti-money laundering program,” says FinCEN Director Andrea Gacki. “However, FinCEN recognizes the significant changes in technology and financial services that have taken place since promulgation of the CIP Rule, and we welcome comments from interested parties as we explore ways to modernize the U.S. anti-money laundering/countering the financing of terrorism regime.”

The RFI will inform FinCEN’s understanding of biometrics and customer identity verification, and evaluate risks, benefits, and safeguards associated with biometric digital ID. It can be read in part as a response to findings in FinCEN’s Identity Financial Trend Analysis that revealed the existence of “significant identity related exploitations through a large variety of schemes.”

Sandbox and Plaid partner to prevent banking fraud

Sandbox Banking will use identity verification technology from San Francisco-based biometric ID verification firm Plaid to add additional protection against fraud. A press release says the integration will apply to the Customer360 module and customer experience workflows from Sandbox Banking’s Integration Platform-as-a-Service (IPaaS), Glyue, to strengthen onboarding, prevent identity theft and ensure secure account creation.

“With consumers increasingly turning to digital solutions to manage their finances, it is critical that financial institutions are properly equipped to protect and maintain their customers,” says Tamara Romanek, head of partnerships at Plaid. “Partners like Sandbox Banking offer accessible innovation for financial institutions, which is a key element of impending open banking regulation.”

Data from Plaid says that 76 percent of fintech users prefer to verify their identity when signing up for a new service.

Article Topics

banking  |  biometrics  |  FinCEN  |  fraud prevention  |  identity verification  |  Microsoft