The Fight Against Fraud

From romance scams to cyber crime, the financial industry is getting hit by fraud harder than ever. Shane Ensminger, Financial Intelligence & Security Director at Central Bank & Trust, is ready to fight back.

by Matt Simpson, KBA Dir. of Communications

The following is a true story of fraud in Kentucky. The names and some details have been changed to protect the innocent. The amount lost to fraud, and manner in which the fraud occurred, are all accurate to the original case.

When John Smith filed for bankruptcy in 2013, the future of his Lexington, Kentucky dance studio hung in the balance. Like so many in America, Smith and his wife faced crushing debt and an uncertain future. The uncomfortable thought that everything he had worked for would soon crumble was starting to feel more and more like an inevitable nightmare.

While good business sense and a knack for money management might not have been one of his strong suits, Smith was, by all accounts, a charming guy and doting husband. At age 41, Smith and his family had developed something of a fanbase within his small community. There were those who found an identity at his studio, who trusted Smith when he told them the business could be saved. All he needed was a little help from his friends.

Of those friends was Jane Doe, who, under the promise of repayment within 5 years, loaned Smith a staggering $30,000. Doe was a kind and nurturing elderly woman, and had been a member of the dance studio since its inception. Like so many others, the quiet studio had become a place of community for Doe. Somewhere she felt safe and needed.

Over time, she had come to trust and admire Smith. Those close to Doe would describe her affection for Smith as romantic, though Doe would never use those words to describe the nature of their relationship. In Doe, Smith saw the life line he had been dreaming of. A way out. But what started as a simple gesture of honest goodwill, soon frayed and spiraled out of control into a careless cycle of reckless exploitation.

Within 5 years, Smith would go on to convince Doe to lend him over $150,000 in personal loans. Smith and his wife would open credit cards under Doe’s name, and together they accumulated upwards to $310,000 in credit card debt. Beyond saving the dance studio, these fraudulent credit cards paid for Smith’s children’s college education, new cars, and expensive clothes. To compensate, Doe was often promised an ownership percentage of the dance studio. However, to this day, no legal documentation suggests that Doe has any rightful ownership of the studio.

“One of the investment officers we work with told us they were suspicious of the requests for distributions out of Doe’s retirement fund,” said Angela Campbell, BSA Officer and Elder Exploitation Expert at Lexington’s Central Bank & Trust. Campbell was one of the first to take notice of Doe’s situation and immediately knew something was wrong. “We don’t have access to her retirement fund records, and they don’t have access to her bank records, so we had to work together. This had to be a collaborative effort to get a clear picture of what was happening.”

That clear picture quickly showed an ongoing funnel of cash from Doe to Smith, prompting Campbell and her team to quickly make a personal visit to Doe’s home. Campbell herself broke the news that, based on evidence gathered at the bank, it was suspected that Doe was a victim of fraud and being taken advantage of.

“It was emotional,” Campbell said. “She had no idea how much money she had lost. When we told her the dollar amount, there were lots of tears. And yet, she didn’t want to take action against Smith.”

Doe’s case, tragic as it might be, is hardly a rare occurrence. In 2022, nearly 70,000 people reported a romance scam, and losses hit a staggering $1.3 billion. And that’s just the ones that were reported. Victims rarely know the amount of money they’ve given to fraudsters. And more often, they simply don’t want to know.

“We honestly have trouble convincing them,” said Shane Ensminger, Director of Financial Intelligence & Security Unit at Central Bank & Trust. “We hear it all the time - I don’t care if I’m getting scammed. This is the only person who will talk to me on the phone for an hour a day.”

Ensminger, a retired police officer and Lexington native, has loads of experience fighting against bad guys like Smith. Most of his career was spent in Special Investigations working narcotics and organized crime. In 2006, a new pattern began to emerge for Ensminger. He noticed that high-level drug dealers were starting to open mortgage companies, tax preparation services and home construction businesses. The drug dealers were turning from narcotics to mortgage fraud in a move fueled by the relaxed lending standards resulting from the subprime mortgage crisis.

It was this evolution that inspired Ensminger to take the fight against these so-called white-collar crimes. Ensminger was charged with forming a crime unit consisting of the city’s best detectives, and together, they hit the door running against the new face of organized crime. “This was stuff that no one wanted to touch initially,” Ensminger said. “But then we started to hit the bad guys hard. We were quickly joined by our partners at the FBI, US Marshalls, IRS, DEA, USDA and FDA, all working together to target white-collar and financial crime.”

After retiring, Ensminger found himself with a particular skill set that made him invaluable to the banking industry. Here was a guy that knew all the tricks of the trade when it came to financial fraud, standing at the brink of an industry getting hit harder than ever by criminals. For Central Bank & Trust

President & CEO Luther Deaton, JR., Ensminger was the perfect weapon in the fight against fraud. He quickly brought Ensminger on to help the bank combat fraud losses. Originally an 8 person team, the unit has now expanded under the leadership of Ensminger to 11 fraud prevention specialists. The fruits of their labor can already be felt throughout the bank.

“Last year, we investigated $16 million in fraud perpetrated against the bank and our customers,” Ensminger said. “Our total losses were low due to our internal and external training and awareness conducted throughout the year.”

In a newly released statement from the Federal Trade Commission, data suggest that consumers reported losing more than $10 billion to fraud in 2023, marking a new record high in total losses reported. That number is an unheard of 14% increase over 2022. Nasdaq, in their 2024 Global Financial Crime Report, released data revealing that fraud and scams totaled an estimated $485 billion globally in 2023. It is important to note that this data tracks banks with an asset size of over $10 billion. When you consider how many community banks don’t reach that criteria, it’s not hard to imagine the staggering amount of losses that simply goes unreported by our smaller banks. It’s an issue Ensminger says he is ready to tackle head on.

“Awareness is key to all of this,” Ensminger said. In

2023, in conjunction with the Kentucky Bankers Association, Ensminger helped to form the KBA Fraud Academy in an effort to equip community bankers with the tools needed to elevate that awareness. “It’s our top priority, our number one goal. There are still so many people that can’t comprehend the magnitude of forces working to fraud you at every moment.”

The KBA Fraud Academy saw a massive turnout during its first year, and starts again August 6th - 8th, 2024, in downtown Lexington. “The KBA Fraud Academy is the ultimate first step in identifying and fighting fraud the same way I have for the last 8 years,” said Ensminger.

Ensminger will be hosting the KBA Fraud Academy again this year, along with several hand-picked presenters ranging from DEA, Secret Service members and more. Bankers across Kentucky will learn what it takes to reduce loss due to fraud. “To truly fight against bank fraud, we have to come together as an industry. Fraud Academy is going to be a key weapon in that fight,” said Ensminger.

Ultimately, it was discovered that John Smith was doing more than exploiting the kindness of the most vulnerable around him. He has since been charged with PPP loan fraud totaling over $40,000. As for Doe? She has only been repaid $166 in total. In her heart, there’s still a small place that wants to believe that Smith is a friend.