The growing momentum of real-time payments has brought more attention to payment confidentiality, integrity and security threats. This momentum has also emphasized the need to more quickly and holistically understand fraud. Although noncash payments fraud remains a very small fraction of total payments value, it is a large number in absolute terms – approximately $8.3 billion in 2015. As a result, the Federal Reserve is taking action by forming and leading a small work group of Fed and payment industry leaders and subject matter specialists to focus on Automated Clearing House (ACH), wire and check fraud definitions. The work group’s roster is available on FedPaymentsImprovement.org (Off-site).

As the payments industry evolves the use of ACH, wire and checks for innovative faster payments, understanding payments fraud trends can help us mitigate fraud risk even as fraudsters continually adapt their attacks.
Ken Montgomery Federal Reserve System Payments Security Strategy Leader
Chief Operating Officer, Federal Reserve Bank of Boston

The Federal Reserve chose to focus on ACH, wire and check fraud because of inconsistencies in the classification and reporting of payments fraud data from study to study. There is also often a significant lag between the time the fraud occurs and when it’s reported. The idea of forming a small and nimble work group to improve these fraud definitions was socialized through industry meetings and dialogue – including last fall’s FedPayments Improvement Community Forum (Off-site). During these industry engagements, stakeholders indicated strong support for this type of work effort. Based on “expressions of interest” submitted by industry stakeholders, the Fed selected a small group of payment industry leaders and subject matter specialists for a year-long work group.

Work will begin later this month to examine existing payments fraud definitions and areas where new or changed definitions could be helpful. The work group seeks to build a recommended payments fraud classification model that includes detailed definitions and/or categories to help the industry better understand key data points and address ACH, wire and check payments fraud. The work group also will develop a roadmap to encourage broad industry adoption of this classification model to improve the consistency and timeliness of available payments fraud data.

Action Item:

Join the Fraud Definitions Community Interest Group by submitting or updating your FedPayments Improvement Community profile (Off-site) and selecting “ACH, Wire and Check Fraud Definitions” as a topic of interest. Also, visit the Fraud Definitions Work Group and Community Interest Group (Off-site) page for updates and stay tuned to Fed360 for other payments improvement initiative highlights from the upcoming Spring Progress Report.