HFSC Hearing: Fighting Fraud on the Front Lines

Summary

SIFMA provided comments to the Financial Institutions Subcommittee of the House Financial Services Committee, commending them for holding this important hearing to examine the challenges and opportunities for financial institutions. Fraud targeting investors is one of the fastest-growing threats to our financial system, and we value the Committee's leadership in exploring how everyone can work together to protect investors across the country.

Excerpt

At SIFMA, protecting investors has been a longstanding core focus of our advocacy and policy work. For over 15 years, we have collaborated with our members, academic experts, and policymakers at both the state and federal levels to advance policies, rules, regulations, and statutes that enhance protections and empower financial professionals to detect, prevent, and report financial exploitation. SIFMA supported the first state law that gave firms the capability to halt suspicious financial transactions, and we later supported a federal law enabling broker-dealers nationwide to place temporary holds on transactions when fraud is suspected. We have also developed and promoted tools including trusted contact forms, temporary holds on transactions, and safe harbor laws that allow firms to act when they see red flags. Today, a growing number of states have enacted similar investor protection laws that extend to broker-dealers, and several other states are currently working to develop a similar path. Consistent with this commitment, SIFMA has advanced policies and initiatives aimed at protecting investors from fraud and scams. For example, SIFMA has recently focused on working with policymakers and investigative agencies to ensure open lines of communication between financial institutions and investigators - which has proven to be a key driver of positive outcomes in attempted fraud cases.

We also work closely with victim support services organizations, research institutions, and other nationwide partners. A few months ago we sponsored NAPSA's Financial Exploitation Prevention Summit, which brought together Adult Protective Services ("APS") professionals, researchers, bankers, law enforcement, investors, regulators, and government officials to discuss strategies for combating financial exploitation.

As part of these broader efforts, SIFMA, alongside our member firms and partners, developed a Senior Investor Protection Toolkit, available for free on our website. This comprehensive resource provides tools and educational materials to help older investors safeguard their finances.

Another key SIFMA-backed initiative is HelpVul (Helping Vulnerable Adults), developed in partnership with NAPSA, EverSafe, and Hunter College with support from the U.S. Department of Justice. This innovative online reporting platform enables financial institutions to securely report suspected exploitation to APS and state securities regulators, standardizing and enhancing investigations of financial abuse across agencies. Already active in several states and dozens of institutions, HelpVul allows real-time referrals, secure communication, and case tracking. It also incorporates digital forensic tools to detect patterns of exploitation.

In the past couple of years, we have seen a great increase in the international fraud trends that are negatively impacting our clients' savings. To that end, we have created an AntiFraud Task Force at SIFMA that will look at the issues more broadly than in the past. While we have previously focused on seniors and vulnerable individuals, this Task Force will work against all forms of fraud. We have brought together operational experts, state law experts, anti-money laundering experts, compliance experts and other financial fraud experts. We are committed to creating a network of peers to problem solve and find ways to get ahead of financial fraud.

Safeguarding investors is a shared responsibility. On behalf of the financial services industry, SIFMA stands ready to work together with policymakers, law enforcement, advocates, and families to protect investors from fraud and scams and enhance investor protections. Protecting investors from such attacks is a complex and rapidly evolving challenge - particularly given the rise of AI - one that demands coordinated action across sectors and the broader community. We remain committed to pursuing solutions that leverage legislation, regulation, education, technological innovation, and collaborative partnerships to address this growing threat.

We thank the Subcommittee for its leadership in convening this hearing and look forward to continuing our efforts to strengthen investor protections and combat the evolving threats of financial fraud.