Dive into the intriguing world of check fraud as Sherah Spark, Head of Compliance and Legal for CheckAlt, sits down with host Tedd Huff at CheckAlt’s Miami office in this compelling episode of Leaders One on One by Fintech Confidential.

If you think checks are obsolete, think again. Sherah reveals some surprising statistics that show the continued relevance of checks, like the fact that 46% of people have written a check in the last 30 days. Shocking, right?

Sherah’s career in the financial sector began in banking, working with mortgages and underwriters. This experience laid a solid foundation for her current role at CheckAlt, where she ensures robust compliance and risk management practices. During her conversation with Tedd, she explains how CheckAlt leverages advanced technologies such as blockchain and AI to stay one step ahead of fraudsters. However, Sherah emphasizes that technology alone isn’t enough; human oversight is crucial for truly effective fraud prevention.

One of the most fascinating aspects of their discussion revolves around check fraud tactics. Sherah explains schemes like check washing, where fraudsters use chemicals or technology to alter checks. They even exploit mobile devices to deposit fake checks. CheckAlt combats these tactics with real-time monitoring and scoring systems to flag suspicious checks. They also use dark web services to track and stop fraud before it happens, ensuring that they can respond to threats proactively.

Sherah sheds light on the delicate balance between speed and risk in the fast-paced fintech world. Companies need to act quickly but also cautiously to prevent fraud. She discusses with Tedd how CheckAlt has integrated a risk-aware culture into its operations, from sales practices to technology decisions. This approach helps them make strategic choices that keep customers safe while staying competitive.

Partnerships are a crucial part of CheckAlt’s strategy. Sherah talks about how these collaborations enhance instant payment security. Instant payments are convenient but risky, as fraudsters can exploit their speed. By working with various partners, CheckAlt enhances its tools to manage and secure these transactions better, ensuring both speed and safety.

For financial institutions exploring new areas like ACH or lockbox functions, Sherah offers valuable advice. She suggests identifying specific pain points and developing strategies to address them. Whether it’s dealing with operational errors or managing product risks, understanding and tackling these issues is key to effective risk management.

Sherah also highlights CheckAlt’s commitment to excellence. The company invests heavily in talent and expertise, ensuring they remain industry leaders. They focus on providing exceptional customer service and maintaining high standards in risk and compliance. This dedication ensures that they not only stay ahead of fraud but also build strong, trust-based relationships with their clients.

Another interesting point Sherah touches on is the importance of combining technology with human judgment. While tools like AI can detect patterns and flag potential fraud, human intuition is crucial for final decisions. This blend of tech and human oversight creates a stronger defense against fraud.

Sherah also discusses the impact of real-time monitoring in preventing check fraud. By keeping an eye on transactions as they happen, CheckAlt can stop fraudsters in their tracks. This proactive approach means they can catch fraudulent activities before they cause significant harm.

Moreover, CheckAlt’s use of the dark web to monitor and track fraud attempts adds an extra layer of security. By scanning online black markets, they can identify and address threats before they escalate. This shows their commitment to staying ahead of fraudsters using every tool available.

Join the conversation with Sherah and Tedd in this episode packed with insights into the world of check fraud and how companies can stay ahead of these challenges. Sherah’s expertise sheds light on balancing speed and caution in the fintech industry, providing a roadmap for other companies to follow.

Stay tuned for more episodes of Fintech Confidential, where we bring you the latest in financial technology and expert discussions.

Don’t forget to like, share, and subscribe for more insights from industry leaders!

Key Highlights

CheckAlt’s Clever Use of the Dark Web

Discover how CheckAlt uses dark web services to monitor and stop fraud. By checking online black markets, they can spot and tackle suspicious activities before they affect customers.

Tech Meets Human: The Best Way to Stop Fraud

Combining technology with human oversight is crucial in fraud prevention. While AI and machine learning can detect patterns, human judgment is essential for making final decisions.

Shocking Check Stats: Are Checks Really Dead?

Find out why 46% of people have written a check in the last 30 days. Learn about the continued relevance of checks and how CheckAlt is innovating to keep this traditional payment method secure.

Fast Payments, Big Risks: Instant Payment Challenges

Instant payments are convenient but come with risks. Explore the challenges of instant payments and how CheckAlt partners with companies like Grail Pay to enhance security and manage real-time transaction risks.

Why Checks Are Here to Stay

Discover the surprising durability of checks in the financial world. Learn why many people still use checks and how CheckAlt’s technology ensures this method remains secure.

Check Fraud Tricks: What You Need to Know

Learn about the sneaky ways fraudsters alter checks with chemicals and technology, such as check washing. Find out how CheckAlt combats these tactics with advanced tools.

Secrets of Successful Risk Management

CheckAlt integrates risk management into daily operations, from sales to tech decisions. A risk-aware culture helps them make smart choices and protect customers effectively.

The Role of AI in Fraud Detection

Artificial intelligence is a powerful tool in fighting fraud but needs human help. Discover how AI is used at CheckAlt to detect fraud quickly and accurately, ensuring customer safety.

Building a Risk-Aware Company

CheckAlt has created a culture focused on risk and compliance. This approach helps them stay ahead of potential problems and ensures they provide top-notch service to their clients.

Understanding CheckAlt’s Compliance Mission

Learn about CheckAlt’s mission to keep customer safety at the forefront while balancing the need for speed in the fintech world. Their approach to compliance and legal matters is crucial to their success and customer trust.

Takeaways (five takeaways)

1️⃣ Protect Your Checks Now

Take immediate steps to safeguard your checks from fraud. Implement practical measures to secure your transactions and avoid common scams like check washing.

2️⃣ Fast and Safe Fintech Tips

Adopt strategies to balance speed with top-notch security. Learn how to make quick, secure decisions that protect your business and customers.

3️⃣ AI + Human = Less Fraud

Enhance your fraud prevention by combining AI with human oversight. Use this powerful combo to improve your security measures and catch fraud early.

4️⃣ Real-Time Monitoring Hacks

Start using real-time monitoring to prevent fraud. Actively watch transactions as they happen to stop fraudsters and protect your finances.

5️⃣ Risk Awareness Secrets

Build a risk-aware culture in your company. Implement strategies to integrate risk management into daily operations and stay ahead of threats.

Links:

CheckAlt Website: https://checkalt.com

LinkedIn: https://www.linkedin.com/company/checkalt

LinkedIn - Shai Stern: https://www.linkedin.com/in/shaistern1

X: https://x.com/checkalt

YouTube: @checkalt3239

Fintech Confidential Links:

Listen: https://fintechconfidential.com/listen

Subscribe: https://fintechconfidential.com/access

LinkedIn: https://www.linkedin.com/company/fintechconfidential

X: https://x.com/FTconfidential

Instagram: https://www.instagram.com/fintechconfidential

Facebook: https://www.facebook.com/fintechconfidential

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Timestamps

00:15 Meet Sherah Spark: Head of Compliance and Legal for Check Alt

00:45 The Surprising Resilience of Checks

01:12 Combating Evolving Fraud with Technology

01:57 Spotlight on Clearing Works

02:27 CheckAlt's Innovative Products

03:06 Sherah Spark's Journey into Fintech

03:21 Early Career in Banking and Risk

04:59 Pioneering Risk and Compliance

05:22 The Importance of Risk and Compliance in Fintech

07:58 Balancing Speed and Risk in Fintech

08:27 The Role of Experience in Risk Management

11:11 Check Fraud Tactics and Prevention

13:22 Advanced Fraud Detection Techniques

20:05 The Role of AI and Human Oversight

22:31 SkyFlow: Building Fast Without Breaking Privacy

23:33 Understanding Risk Appetite and Frameworks

25:27 Grail Pay: Partnering for Instant Payments

28:39 Advice for Financial Institutions on Risk and Compliance

30:42 CheckAlt's Commitment to Excellence

32:20 Conclusion and Final Thoughts

About:

Guest

Sherah Spark: Sherah Spark is the Head of Compliance and Legal at CheckAlt, where she plays a crucial role in shaping the company’s risk management and compliance strategies. With extensive experience in the banking sector, Sherah has a deep understanding of financial risk and compliance. She began her career in the mortgage industry, working with underwriters to evaluate financial profiles, which laid the foundation for her expertise in risk management.

Sherah’s career has been marked by her dedication to creating robust compliance frameworks and mitigating risks in the financial sector. Before joining CheckAlt, she held significant roles at reputable institutions like U.S. Bank and Wells Fargo, where she led several strategic multi-million dollar initiatives and managed complex projects.

At CheckAlt, Sherah is instrumental in integrating advanced technologies like AI and blockchain with traditional risk management practices, ensuring that the company stays ahead of evolving fraud tactics while maintaining a human touch in oversight. She is passionate about driving business growth and customer satisfaction, always putting customers at the center of business decisions.

Sherah holds a Master’s degree from Boston University and an undergraduate degree from the University of Minnesota. Outside of her professional endeavors, she enjoys exploring new destinations, immersing herself in diverse cultures, and seeking inspiring experiences that broaden her perspective.

With her visionary leadership and risk management expertise, Sherah Spark continues to make significant contributions to the financial industry, helping CheckAlt provide innovative and secure payment solutions to its clients.

CheckAlt : CheckAlt is the largest independent provider of receivables management and payment and deposit processing solutions in the U.S., serving more than 1,000 clients across a broad range of industries, including financial institutions of all sizes, property management, healthcare, utilities, municipalities, and nonprofits. Operating as payment channel and demographic agnostic, CheckAlt processes check payments while also supporting electronic payment needs that are accelerating digital transformation. CheckAlt's solutions include lockbox processing across a nationwide hub-and-spoke network of processing sites, consolidated item processing, integrated treasury solutions, and mobile capture services. Learn more at https://www.checkalt.com.

Host:

Tedd Huff: Tedd Huff is the Co-Founder of Voalyre, and the President & Founder of Diamond D3, a professional services consulting firm focused on global payments and marketing. He is also a video podcast host and producer of Fintech Confidential.

Over the past 24 years, he has contributed to FinTech startups as an Advisory Board Member, Co-Founder, and Chief Experience Officer, providing strategic and tactical direction for Global Payments OpenEdge, Heartland Payments, Nuvei, and TSYS, among others, focusing on growth while delivering innovation, process improvements and user experience-driven value to simplify the complexity of payments.

Diamond D3, Media: A media creation, management, and production company delivering engaging content globally

Welcome to Fintech Confidential, bringing you the

2

people, tech, and companies that

change how you pay and get paid.

3

Welcome to another episode

of Fintech Confidential.

4

I'm sitting here with Sherah

Spark, the head of compliance

5

and legal for Check Alt.

6

Sherah Spark: Typically, when

you talk to people from a risk

7

background, you may think, well,

they're going to slow things down.

8

They're going to slow progress

down because they want to check all

9

the boxes and do the activities.

10

I think there's a risk reward balance

that you really have to take to when

11

you approach anything really, but I

mean specifically with the products

12

that we're bringing to market.

13

When I first came into the

company, my first question was,

14

aren't checks blowing away?

15

I was blown away by the statistics

of billions of dollars of checks

16

that are written on an annual basis.

17

46 percent of people have written

a check in the last 30 days.

18

The checks obviously have been

around for A very long time.

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What's new is the technology and

the way that these broadsters

20

are making these deposits.

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What's not new is they've been

taking them through the mail.

22

At Checkout, we have to be, as the

broadsters are evolving and their

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approach and the way that they're, you

know, committing crimes, so do we as

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financial institutions, as financial

technology companies, have to be

25

advancing our own approach to combat that.

26

And so one of the ways that we're doing

that is using things like Blockchain,

27

AI, things that are again, real time

technology always, in my opinion, has

28

to be partnered with a human because

we can train AI, we can train machine

29

learning, but there has to be I think

a human element on the other side.

30

I think maybe eventually we'll get

there, but there always has to be

31

a human involved in that equation.

32

Tedd Huff: Now let's quickly shine

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33

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38

Welcome to another episode

of Bentech Confidential.

39

I'm sitting here with Sherah Spark, the

Head of Compliance and Legal for CheckAlt.

40

CheckAlt has been releasing some

really great products and really

41

moving things forward when it comes

to ACH, RDC, Lockbox, eLockbox,

42

and Remote Deposit Capture.

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So all of these things.

44

I know we think about checks

going away, but believe it or

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not, they're not going anywhere.

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So I'm really glad to have you here

today, especially to talk about check

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fraud, the legal, the compliance, all

the stuff that kind of goes around this.

48

But before we dive in, I'd

love for you to give us your.

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As I like to call it, the

falling into fintech story.

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How, how did you get, first get

into the financial area and what

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was the big thing that got you to

focus on compliance and, and risk?

52

Sherah Spark: Thanks for having me.

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I started out my career

early on in banking.

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I have people say that they

accidentally fell into being a banker.

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I was very, had good intentions to go

right into the financial institution.

56

My first role was in

the mortgage industry.

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I was in college and this was during the

mortgage boom and it was processing loans.

58

And one of the things that I didn't

realize at the time was that processing

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loans, working with the underwriters

really was my kind of first step into

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working in risk and compliance, looking

at the financial picture of each customer.

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Working with the underwriters to

understand if the organization

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was ready to take on that risk.

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That was kind of my first

exposure to this topic.

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Fast forward to a couple years

later, I started working on

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the retail side of banking.

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And my role was really to

prepare the banks for audit.

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My role was specifically sales.

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An audit and sales and service, but sales

and yeah, that's a interesting combo,

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but it's interesting because it teaches

you the practices to be aware of, to

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keep customers safe, to keep the bank

safe all while doing sales practices.

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It's a genius concepts.

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Now, in execution, there's always a lot

of pressure when it comes to stale, but

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if you can have that compliant mindset,

it makes you aware of being careful.

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And being cautious, protecting.

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The company protecting the customers

in this role, I thought my strength

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was sales, but what I really started

to identify is that I really had

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a passion for the risk side of

the role, the risk and compliance.

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From there, I jumped into a, the

fifth largest bank in my role there,

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there was six of us that were, were

at the beginning, at the forefront,

80

pioneering risk and compliance.

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So this was probably about 15 years ago.

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When it wasn't a buzzword yet, nobody

had really caught on to like this

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really important aspect of the company.

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I

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Tedd Huff: think it's interesting you say

that because one of the conversations that

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I have a lot with my clients is really

risk and compliance is a primary focus.

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And in a lot of cases, you

know, they ask me, what should I

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budget my operating expenditures?

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What I've seen is about 30 percent or

so of the total budget seems to be what

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keeps people out of a lot of trouble.

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And now mind you, I work with a

lot of more aggressive fintechs for

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banking as a service type products

or things that are really about the

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money movements and diving into the

AML, BSA, the KYC slash KYB space.

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That's where they spend

a lot of their time.

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How does where you sit

and where you came from.

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Does that play a big piece in it as well?

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Sherah Spark: Fast forward

to where I am now in fintech.

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Banking has played a role in

keeping me very conservative.

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Seeing what happened to some of the large

organizations that I've worked with.

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How much effort that they put into

risk and compliance has helped really

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curb and mitigate any type of issues

that we've had in the past or that some

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financial institutions have run into.

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Going back to what I was just

talking to you a couple minutes

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ago, we grew from six people to 150

in two years from a risk culture.

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It really changed the way that

our organization did business.

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Working with several bankers now

at Checkult, we have risk and

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compliance really ingrained into

our DNA, into what we do every day.

108

Whether it's from our sales practices

to our technology, having that kind of

109

mindset ingrained in everything that

we do into the fabric of the company,

110

really working with other bankers

that are now here at this fintech

111

company has helped us to align, make

more strategic decisions and align our

112

approach to how we're making decisions.

113

Tedd Huff: When you start to talk about

these strategic decisions, bringing

114

in an experience for it, how would you

describe your mission and how it fits in

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with the overarching CheckAlt mission?

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Sherah Spark: I would say one of the

unique characteristics of what I bring to

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CheckAlt is keeping very customer focused.

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And what I mean by that is I think

typically when you talk to people from

119

a risk background, you may think, well,

They're going to slow things down.

120

They're going to slow progress down.

121

because they want to check all

the boxes and do the activities.

122

I think there's a risk reward balance

that you really have to take to

123

when you approach anything really.

124

But I mean, specifically with the

products that we're bringing to market

125

with the business, how the speed, the

speed is something I've definitely

126

have to have had to get used to.

127

Banks are typically slower, right?

128

And more cautious, but bringing that

balance of speed, Speed and the trade off

129

of how much risk we're willing to take.

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Tedd Huff: How do you

approach that balance?

131

Because it, it, it's one

of those pendulums, right?

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Sherah Spark: Yeah.

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That

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Tedd Huff: swings sometimes really fast.

135

How are you maintaining that balance?

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Sherah Spark: Part of my role

is bringing in, because we're

137

operating so fast, you have to go

on information that you know today.

138

Can't predict it.

139

Future, you can bring in your experience

into that lens, but I think it's

140

presenting the fact and then working

with our executive leadership team to

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say, based on what we know today, are

we willing to take this type of risk?

142

It's a incremental test and learn.

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A lot of, I think what FinTech

is, is testing and learning,

144

being cautious, but being very

calculated at a very fast speed.

145

Tedd Huff: As you look at the way

that Chekhov is approaching the

146

market, are there specific things with

maybe specific products or specific

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features within products that you

see as a lifeline when it comes to.

148

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Sherah Spark: Each one of our products

has its own unique identifiers.

158

I would say the way that we're approaching

check is unique in the sense that we

159

are partnering with other technology

companies in the industry to bring in.

160

what they're doing really well at to

help protect our consumers, protect

161

our partners or business partners

that we're looking at, that we're

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working with and that lifeline of.

163

Thinking about risk and compliance and

protecting the consumer, protecting the,

164

the business, I think, is, because checks

are our lifeline to this company, uh,

165

we have to be very diligent in how we're

protecting any type of exposure there.

166

When I first came into the

company, my first question

167

was, aren't checks going away?

168

I was blown away by the statistics

of billions of dollars of checks

169

are written on an annual basis.

170

Forty six percent of people

have written a check 30 days.

171

And don't quote me on that, but

it's a high, high percentage,

172

much more than I ever expected.

173

If we can become the best at this

quarter market and do so with trust and

174

integrity and keeping risk and compliance

at the forefront, It's a win win.

175

It's a win for us because

we become a trusted advisor.

176

It's a win for our customer because

we're protecting their funds.

177

Tedd Huff: It's kind of funny, at least

from my perspective, that some of the

178

same tactics from the movie Catch Me As

You Can that was loosely based on Frank

179

Abigail and his check fraud spree over

those years, some of those things haven't

180

gone away, but not only have they not

gone away, there are new Different ways

181

that one that they're doing the check

fraud and two, how they're the fraudsters

182

are all kind of coming together.

183

Could you outline?

184

The three big areas you're

working with here at CheckAlt,

185

as far as check fraud goes.

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Sherah Spark: You mentioned Lockbox,

that's one of our biggest services

187

here at CheckAlt, and with Lockbox

comes a partnership with the U.

188

S.

189

Postal Office, and postal

workers are being targeted

190

for things Getting their keys.

191

People are going into the mail

boxes and opening up envelopes

192

and taking checks there.

193

I mean, we see a lot of check washing.

194

Tedd Huff: Can you describe that?

195

Sherah Spark: Yeah.

196

So check washing is basically it's

either technology or chemicals and

197

they're taking and lifting the payee

typically and the dollar amount off

198

of the check and writing it for a new

amount, writing it to a new payee.

199

And what they're doing is they

are walking, paying what they call

200

mules or walkers to go into branches

to cash check to make deposits.

201

And then you can also obviously deposit

it through a mobile device as well.

202

The checks obviously have been

around for a very long time.

203

What's new is the technology and

the way that these fraudsters

204

are making these deposits.

205

What's not new is they've been

taking them through the mail.

206

So if you think about that,

they're just changing.

207

The way they're using technology

to accelerate how rampant this is

208

at checkout, we have to be as the

broadsters are evolving and their

209

approach and the way that they're,

you know, committing crimes.

210

So do we, as financial institutions,

as financial technology

211

companies have to be advancing.

212

Our own approach to combat that.

213

And so one of the ways that we're doing

that is using things like blockchain, AI,

214

things that are again, real time dark web

services, where we have partners that are

215

going into social media and looking at

checks that are being put up for sale on

216

the internet, if you can get ahead and

be more proactive and getting ahead of

217

these Um, playing somewhat of a similar

game is speed to market, speed to them

218

getting to cashless check, being able

to have access to them in real time.

219

I think that's one of the ways that

you can combat this check fraud

220

situation that we have going on.

221

Tedd Huff: One of the things that I,

that I learned recently from a former FBI

222

agent that honestly didn't cross my mind

because I remember doing RDC 15 years ago.

223

Yep.

224

And I remember doing.

225

Remote deposit capture when it first

released, but I never in my wildest

226

dreams had thought that someone

was going to take those images

227

Sherah Spark: and

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Tedd Huff: then reuse them for a lack

of a better phrase to resubmit them,

229

how mature is that actually going

on and what are some of the things

230

that you're seeing the financial

institutions as well as check all.

231

Do to combat against

232

Sherah Spark: because mobile devices

are so inexpensive and pretty much

233

anybody can have access to it.

234

Think about then the volume

of how that transcends into.

235

Get being able to get a check through mail

or through however they're getting it.

236

Right.

237

And mail, I think is the biggest piece.

238

Be able to take a picture of it.

239

And then they're also going

into computers as well.

240

I mean, we've seen that.

241

So things that we're doing to combat

that, I think, again, dark web

242

services, doing an analysis on the tech.

243

So there's a couple of partners that

we're working with that will actually

244

collect data on individual accounts and

they'll be able to analyze the data.

245

score checks as they're

coming into our system.

246

One of the things that we're doing is

we have a tool that will score a check.

247

It'll basically, it plagues it for

fraud or the potential of fraud.

248

And then what we need to do is to analyze

basically it's a yes or no decisioning.

249

It's a decisioning tool

is really what it is.

250

Typically, this will look at things, the

characteristics on the check based on The

251

information that's in a database that will

tell a little bit about the history of

252

the account and the history of the check.

253

So if somebody is writing a check

for 500, then they're always writing

254

out to the same lawn service.

255

And we see an out of pattern check come

in, it'll get flagged in the system.

256

And then somebody has to review

to accept or deny that deposit

257

or that payment, I should say.

258

So those are just ways in real time

that we can put controls in place

259

because it's all about mitigating risk.

260

You're not going to catch everything,

but those are the type of tools and

261

controls that you can use to catch

or flag these checks in real time.

262

Tedd Huff: We look at the

fraudsters at all, right?

263

And you look at procedures and the tools

and everything that You have to use,

264

and you mentioned, uh, you've mentioned

blockchain, you've mentioned AI.

265

Yep.

266

What does the roadmap look like?

267

Maybe, yeah, what will the

roadmap for checkout look like?

268

And how does that stack up against

what's going on in the marketplace?

269

Sherah Spark: So, our roadmap

To how we're going to leverage

270

technology is getting to cloud first.

271

I think a lot of those tools

will compliment blockchain will

272

compliment the cloud technology.

273

The way that I think about it is

technology is a way for us to, you

274

know, optimize, automate, create

efficiencies around some of the manual

275

processes that not only we, but other

financial institutions based, I think.

276

We are operating in such, we meaning

financial industries, banks, are

277

operating on such old systems and old

ways of thinking and doing things,

278

not only from a technology standpoint,

but from a process standpoint that

279

we have such an opportunity to catch

up with what fraudsters are doing.

280

I think what fraudsters are doing is

taking advantage of technology and

281

fast, rapid paced environment where.

282

Banks and financial institutions are

caught up in bureaucracy and trying

283

to just get something approved and

we're so far behind in that pace

284

where fraudsters are able to take

advantage of that weakness from an

285

FI bank perspective and capitalize

on this whole check fraud industry.

286

The way that we're thinking about

differently is if we're a financial

287

technology company and we're not large.

288

How can we start to like operate and in

an environment and take advantage of not

289

having to go through tons of red tape,

tons of bureaucracy so that we can rapidly

290

protect our customers with new tools that

are in the cloud, that are automated,

291

that are AI, that are blockchain.

292

The advantage of being a smaller company

is that we don't have to run through that

293

red tape, we can partner with others that

are like minded, again, speed to market

294

on these and keep up with the rapid speed

of what's going on on the other end, which

295

is the fraud, which is the fraudsters take

advantage of technology for their benefit.

296

Tedd Huff: Are there any partnerships

that you guys have put into place

297

that are really reducing some of,

or mitigating some of the risks?

298

I would assume at the same

time that allows you to offer

299

new features and functions.

300

Sherah Spark: Most of the

partnerships are to be announced.

301

Tedd Huff: I tried to get it out of you.

302

Is there anything you can

303

Sherah Spark: talk about?

304

Let's go there.

305

Which ones can you talk about?

306

Let me talk about the features, because

I think that's the most important part.

307

We can do things like

account authorization.

308

One of the challenges with check fraud is

account authorization, account balance.

309

We have the ability to

understand if, potentially, if

310

there was an account takeover.

311

Or an unauthorized transaction, if

things look like they're out of pattern.

312

Other tools that we can use is the Dark

Web Partnership, where they can flag

313

checks that are out there for sale that

might have come in through our system.

314

So those are just kind

of a couple examples.

315

The scoring system is

another thing, right?

316

Understanding if there's a partnership

that we're working with is Looking at

317

scoring checks as they come into our

system, and there's, I think, 26 to 30

318

different characteristics that they're

looking at that will help indicate whether

319

or not there's potential fraud, you know,

in the end, technology always, in my

320

opinion, has to be partnered with a human

because We can train AI, we can train

321

machine learning, but there has to be, I

think, a human element on the other side.

322

I think maybe eventually we'll get

there, but there always has to be

323

a human involved in that equation.

324

Tedd Huff: It's amazing how fast we've

gone from it being an idea to trying

325

to figure out how to use it to minimize

the repetitive tasks that we all do.

326

And you hit on something that's,

that's a really big piece

327

for me is that human reason.

328

And that's the one thing that if you

look at all the artificial intelligence

329

technologies that are out there,

that's the one thing it can't do.

330

It can't do the human reasoning.

331

It can look at patterns.

332

It can look at different things.

333

It can synthesize, and it can tell

you what it seeds, but it can't do it.

334

Reason, to what that actually means

and what you should be doing about it.

335

Yeah So I think that's one of the big

pieces that is still open and one of the

336

things that I've heard Multiple times

recently is we have to stop looking

337

at AI as being a human replacement.

338

Sherah Spark: Agree.

339

Tedd Huff: And being more

of human augmentation.

340

And on that same topic, how are you

from the risk in front side of the

341

house approaching or looking at it?

342

Are you looking at it from, it sounds

like you're looking at it from the

343

augmentation side of the house.

344

How do you see it augmenting, maybe

not today, but in the near future?

345

Sherah Spark: I see it as

a tool for speed, right?

346

So we only have so many hours in

a day, only have so much attention

347

span, brain power capacity.

348

I think technology can be used

as a tool to help present data.

349

But in the end, it has to come

down to what is our risk appetite.

350

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372

Sherah Spark: What is the company or the

individual or the partnership willing to

373

take on from a risk appetite standpoint?

374

What type of risk framework

are you dealing with?

375

You look at things like scoring and,

you know, checks that are coming in.

376

Some may have tolerance for

an 80 percent risk or some may

377

have tolerance for other things.

378

But I think in the end, each

financial institution, FinTech, has to

379

understand what their risk appetite is.

380

What the framework is that they're

working with and use technology as a

381

tool to help drive those decisions.

382

Some of it's going to be

on data analytics, but are

383

you working with good data?

384

Is the data clean?

385

Right?

386

Because if you don't have clean,

solid data, then Your outputs

387

are going to be false negatives,

potentially, or false positives.

388

There's got to be that

human element to it, right?

389

And as much as data and technology

can help present information, some

390

of it at the end of the day is going

to be based on things like intuition

391

and gut feeling and all those things

that we can't always quantify.

392

Tedd Huff: So it's kind of the, an

extension of the trust verify type thing.

393

Trust that it's giving you the

information you need to look at.

394

But verify that the information

that's giving you is actually what,

395

what you need to, to move forward.

396

Sherah Spark: Yeah.

397

And there's things like, you know,

predictive analytics too, right?

398

When we talk about

fraud that play into it.

399

But I think at the end of the

day, there's got to be the

400

human element on, on the end.

401

So.

402

Our roadmap looks like cloud technology.

403

It looks like partnership with those

friends that are in the industry

404

that are do really well at that.

405

We, we don't want to become a

fraud expert, but we want to

406

partner with those that can protect

checkout and protect our customers.

407

Tedd Huff: I'm going to ask one more time.

408

Are there any partners we can talk about?

409

Is there anybody that we can point

out that's really helping you?

410

Sherah Spark: Okay, so we

can talk about Grail Pay.

411

Okay, so

412

Tedd Huff: what is Grail Pay

and how are they helping?

413

Sherah Spark: We're testing

out use cases right now.

414

One of the, I think, Wild

West features out there or I

415

Tedd Huff: love that you called

it a Wild West feature or method

416

of payment, but yeah, continue

417

Sherah Spark: is instant payments.

418

I mean, there's when I think about

fraud, I think about this is a perfect

419

example of where fraudsters can come in.

420

I don't know if there's a lot of really

great controls around instant payments

421

today, but GrailPay is one of those

companies that we're working with on

422

different use cases to look at features

and tools that they have to help us make

423

our decisions around instant payments.

424

Tedd Huff: Instant payments is a unique

space, especially for us here in the U.

425

S.

426

I mean, it's been in, in

Europe, or I should say Great

427

Britain for, for many years.

428

And here in the U.

429

S.

430

we're still trying to figure

out, how do we make it work?

431

How do we make it work within the

frameworks that we have today?

432

Can we make it work within

the frameworks we have today?

433

And then not only that, we didn't

get one way to do it, right?

434

We've gotten from the car brands.

435

We have instant payments.

436

We've got from the clearinghouse They have

their own version of instant payments.

437

Then you've got fed the Fed and it

launched with their version Yeah, and

438

they all kind of are going after the same

problem But in completely different ways

439

and I can only imagine how complicated

that makes for you when you're trying

440

to figure out how do I mitigate the

risk and how do I maintain compliance?

441

Is there something that Grail Pay

is doing that would help you with

442

that or is it just augmenting some

of the things you're already doing?

443

Sherah Spark: I think it's augmenting

some of the things we're already doing.

444

You know, when I think about instant

payments, I think about, from a

445

merchant standpoint, I think about

people's ability to set up businesses.

446

There could be loopholes there,

right, around merchants or, or

447

pretend merchants being able to set

up these companies and then being

448

able to make instant payments, right?

449

So, one of the things that,

again, we were looking at multiple

450

use cases on how to implement.

451

Grail Pay is tools within our risk

management framework, but one of

452

them is like account authorization.

453

And again, historical lookbacks on

you're getting an instant payment

454

and just making this up for 5, 000,

but that's not a usual activity.

455

within that company.

456

Like we have the ability to look at

with their help with transactional

457

history to make sure there's nothing

that's out of line or out of pattern.

458

So having that access to a consumer or

business account, I think will be huge and

459

helping mitigate some of the fraud that.

460

I see could be happening, but I don't

know if anybody's really figured out how

461

to manage fraud around instant payment.

462

So we're pretty excited to partner

with Grail Pay to use some of their

463

capabilities in the instant payment space.

464

Tedd Huff: What if I was a company that

hadn't really been looking at anything

465

other than just physical checks?

466

And I start to get into the ACH,

I start to get into the lockbox,

467

so the e lockbox functions.

468

Is there any advice that you would give

to those FIs or non FI companies on how

469

to approach their, their problems around

risk and compliance in those spaces?

470

Sherah Spark: Each FI and bank can have

a little bit of a different pain point.

471

So, some of it could be operational

risk, some of it could be product

472

risk, failure to launch, some

of it could be people risk.

473

So, each company is going to have a

different, I think, pain point when

474

it comes to risk around lockbox,

around the different products.

475

My advice would be to identify what those

pain points are and to think about The

476

strategy behind how to mitigate, you

know, if it's operational risk, so let's

477

talk about lockbox, for example, if you

think about the number of processing

478

errors, understanding the metrics

around what those errors are, and then,

479

you know, finding a plan or a way to.

480

mitigate, you know, operating errors.

481

If it remote deposit capture, you

can have errors there as well.

482

It, what is the technology that you're

using to capture the characteristics

483

and images of the check, right?

484

Does your software work?

485

What type of software are you using?

486

So, one of the tools that we use

has very low error rates when it

487

comes to, you know, picking up the

images on the actual check itself.

488

So, Again, I think going back to what

is the problem that you're trying

489

to solve, identifying your, your

risk that way, and then looking for

490

strategies or ways to mitigate it.

491

Tedd Huff: Is there anything that we

haven't talked about that you're like,

492

just got to talk about this one thing.

493

Is there anything that we've

missed that you want to make

494

sure that the audience hears?

495

Sherah Spark: Checkult has the talent and

the expertise around it today that really

496

is supercharging Um, I think it's really

important for us to be a company that is,

497

you know, first, best in class, we've got

the experience and the talent behind us

498

that is going to help us navigate into the

future, whether it's risk and compliance,

499

whether it's, you know, operational

excellence, that I think if financial

500

institutions are looking to Partner with

an organization that really is investing

501

in its talent to become best in class.

502

I think there'll be happy with the

results that they get in that partnership.

503

When we say about, we, you know, put

people first, we put our customers first.

504

Like, I think they'll find that

in their experience with the

505

technical organization, that.

506

It's really genuine and authentic

and they'll know that from the

507

time that they meet us throughout

the whole life cycle, right?

508

It's not just at the time of sale.

509

I think people here in the company really

have a genuine interest to do the right

510

thing, provide great customer service.

511

We're putting a lot of care into risk and

compliance throughout the organization.

512

So again, it becomes really

the fabric of who we are.

513

You know, risk and compliance isn't

sexy, it's an insurance policy

514

that is, so to speak, but it's all

about what's doing, doing the right

515

thing so that we can invest not

only in today, but into our future.

516

So I think that's what our customers or

prospects will find when they come to us.

517

Tedd Huff: I appreciate the time you've

taken out to sit down here with me.

518

It's been really insightful

to understand and learn from

519

you throughout the day today.

520

And I just want to thank you for taking

the time to sit down and chat with me.

521

Sherah Spark: Awesome.

522

Thank you.

523

Thank you.

524

Tedd Huff: As we wrap up today's

episode, I've got one last thing for you.

525

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how you fight fraud and financial crime.

538

Lilly: This has been a production of

DD3 Media with all rights reserved.

539

This is provided for

informational purposes only.

540

It is not offered or intended to

be used as legal, tax, investment,

541

financial, or other advice.

542

We strive to provide accurate and

up to date information, but will

543

not be responsible for any missing

facts or inaccurate information.

544

You comply and understand that

you should use any of this

545

information at your own risk.

546

Cryptocurrencies are highly volatile

financial assets, so research and

547

make your own financial decisions.