Holds, Hopes, and Holes: Why Funds Availability Rules Are Failing Fraud Teams

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Mar 26, 2025

Hailey Windham dives into the challenges fraud teams face with outdated funds availability rules. She critiques Regulation CC's effectiveness against modern fraud schemes, highlighting issues like rapid treasury check availability and insufficient detection holds. Windham proposes practical solutions, advocating for better staff training and innovative verification tools. She urges collaboration between fraud, compliance, and operations teams to create a more robust defense against fraud, paving the way for essential industry-wide changes.

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ANECDOTE

Treasury Check Fraud Story

A member deposits a treasury check that appears legitimate, and the credit union makes funds available per Regulation CC.
Eight months later, the credit union receives a reclamation notice for a forged endorsement and loses $18,000.

INSIGHT

Outdated Regulation

Regulation CC, designed for a pre-internet era (1987), struggles to keep pace with modern fraud schemes.
Today's fraud is faster, more strategic, and technologically advanced than what Reg CC was designed to handle.

INSIGHT

Insufficient Hold Periods

The 10-day exception hold under Reg CC is often insufficient for detecting complex fraud, like with treasury checks.
This creates tension between fraud teams who suspect fraud and compliance/operations teams bound by the rules.

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Banking on Fraudology is part of the Fraudology Podcast Network.

In this compact but powerful episode of Banking on Fraudology, Hailey Windham tackles a topic that's causing major headaches for fraud teams across the country: the limitations of funds availability rules. Windham expertly breaks down how Regulation CC, created in 1987, is struggling to keep pace with the sophisticated fraud schemes of the digital age. She paints a vivid picture of the challenges facing financial institutions, from the rapid availability requirements for treasury checks to the inadequate hold periods for detecting complex fraud.

Windham's expertise shines as she dissects the "doubtful collectability" clause and explains why the current 10-day exception hold often falls short in today's fraud landscape. She addresses the difficult position fraud teams find themselves in - caught between compliance requirements, operational pressures, and their own instincts about risky transactions. But this episode isn't just about identifying problems; Windham offers a wealth of practical solutions.

Listeners will gain valuable insights into maximizing their use of exception holds, enhancing frontline staff training, leveraging new verification tools, and strategically using account structures to mitigate risks. Windham's call for breaking down silos between fraud, compliance, and operations teams is particularly poignant. The episode concludes with a rallying cry for industry-wide change and a handy "cheat sheet" of Reg CC reminders. Whether you're a fraud fighter, compliance officer, or financial institution leader, this episode is a must-listen. Tune in to arm yourself with knowledge, strategies, and inspiration to better protect your institution in the face of outdated regulations.

About Hailey Windham:

As a 2023 CU Rockstar Recipient, Hailey Windham, CFCS (Certified Financial Crimes Specialist) demonstrated unbounding passion for educating her community, organization and credit union membership on scams in the market and best practices to avoid them. She has implemented several programs within her previous organizations that aim at holistically learning about how to prevent and detect fraud targeted at membership and employees.

Windham’s initiatives to build strong relationships and partnerships throughout the credit union community and industry experts have led to countless success stories. Her applied knowledge of payments system programs combined with her experience in fraud investigations offers practical concepts that are transferable, no matter the organization’s size.

Connect with Hailey on LinkedIn: https://www.linkedin.com/in/hailey-windham/