Why can't banking practices change to prevent money-forwarding scams?

There are many varieties of “money-forwarding scams” and many of them illicitly forward good funds, some with the knowledge of the money mules (a term of art) and some without.

With regards to the exact scenario you outline, the core problem is that ACH payments in the US cannot, at the receiving bank, be guaranteed to represent good funds except probabalistically after the ACH return window has passed, and may not be good funds even then. There are both legacy reasons why this is true, dating to the clearinghouse system for paper checks, and UX reasons why it remains true.

Many remediations against this and similar attacks create winners and losers in the legitimate economy. For example, increasing the friction to receive a transfer from a novel source impacts the ability of family members to help relatives in event of emergency, hits the cash flow of semi-formal businesses severely (many sole props operate out of personal accounts and may take dozens or hundreds of first-time payments a month), affects new clients in the onboarding window (who you can’t usefully exclude because they make up a large chunk of accounts which will participate in this fraud), etc.

Note that another way to phrase “Ensure customers don’t end up holding the bag” is “Banks should be less willing to extend credit to poor people” and that there are non-trivial policy and justice implications of that proposal. It is not widely understood by consumers that a US checking account is a credit product, but it is, and the operation of many households assumes this fact of the status quo.

Banking is, from a software perspective, a graph of connected, double-entry ledgers. On the back end, state changes propagate electronically over old and hoary roads (FTP, as another poster mentioned). The businesses that operate these strange constructs are old and powerful, and jealous of their position of authority. And the modern information age has vastly increased their power, as never before has so much information been available for so many transactions! Money is action is state, so the banks know, modulo cash spending, what literally everyone in the world is doing. If regulation and old tech wasn't there to protect their entrenched interests, the banks would have to invent it.

> is it more because of logistical reasons?

In the US, ACH/cheque cashing with the number on the bottom is a FTP-based legacy system. Your bank floats you the amount as a credit within a few days or a week, depending on the funding source. For example, business cheques usually "clear" faster because they are less risky.

But they haven't actually cleared yet, it's a multi day (probably weeks, tbh) situation where you have to download ACH return/error files every day and hope none contain that transaction.

This is why a lot of places don't accept personal checks. This has been around for decades "bounced checks" - NSF (not sufficient funds), REFER TO MAKER, STOP PAYMENT, etc. Not only do you not receive the funds, you are fined by your own bank.

It is a crime in most states (keep the returned check handy) https://oag.ca.gov/consumers/general/bad-checks but kind of hard to enforce

The answer to the categorical "why do scams exist" is based on current systems which have misaligned incentives. Banks do not view the problem of money forwarding scams large enough to fix. If there were added regulatory burden of getting fines, class action lawsuits, pressure from the media or Congress, then the economics may change enough to fix their operational deficiency.

Look at other dark patterns that used to exist but no longer do, like suppressed salary collusion between Google, Microsoft, Apple 15 years ago vs now. As technology and society changes though, more opportunities for new dark patterns emerge. It takes a lot of dead bodies and time before politics and policies take notice and build up enough outrage to catalyze a change.

But banks do prevent old-fashioned check scams. By providing better payment options. I frankly don't know anyone who still uses checks for anything, and that's probably with good reason. Instead of sending a check, the payer could simply transfer money.

Though it would be nice if you could pay by having the bank hold the money in escrow and releasing it upon proof of delivery. That would be a really nice improvement that I haven't seen yet (at least not for small payments).

Here's a business model

https://techcrunch.com/2020/10/06/nivelo-nabs-2-5m-seed-to-r...

The same reason any type of financial fraud continues to exist.

The costs associated with fixing the last 1% exceed the total liabilities of that last 1%.

Because fools are so ingenious

Maybe there's a business model here?