Skip to main content

FraudClassifierSM model addresses inconsistent fraud classification

To help address the industrywide challenge of inconsistent classifications for fraud involving Automated Clearing House (ACH), wire or check payments, the Fraud Definitions Work Group (Off-site) led by the Federal Reserve developed the FraudClassifier model. This new fraud classification model enables payments stakeholders to classify fraud in a simple and consistent manner.

For organizations, the key advantage of the FraudClassifier model is the ability to classify fraud regardless of payment type, payment channel or other payment characteristics. The model focuses on a series of questions, beginning with who initiated the payment to differentiate payments initiated by either authorized or unauthorized parties. The result is a holistic view of fraudulent events, which can help with more strategic fraud management. Each of the classifications is supported by definitions that allow for consistent application of the FraudClassifier model across the industry.

Fraud Classifier Model

Benefits of voluntarily adopting the FraudClassifier model include:

  • Facilitating consistent fraud information and tracking: The FraudClassifier model can be applied across an organization to help ensure greater internal consistency in fraud classification, more robust information and better fraud tracking.
  • Improving customer education: The FraudClassifier model may help an organization better understand fraud to more effectively educate its customers on current fraud methods and how to protect themselves from being victimized.
  • Understanding fraud across payment types and fraud methods: The FraudClassifier model was designed to help classify fraud for multiple payment types and fraud methods. Such insights can improve fraud response strategies.
  • Speaking the same language about fraud: If voluntarily adopted across the payments industry, the FraudClassifier model can facilitate a common fraud language and help us work together to better identify and fight fraud, fostering a safer payment system for all.

Learn more about the FraudClassifier model (Off-site) and explore different classification paths through an interactive version of the model. Then register to access educational resources and support tools (Off-site) for the model, such as a downloadable version of the model and supporting definitions, as well as a fraud classification tool.

The FraudClassifier model was developed by a cross-industry work group to provide a consistent way to classify and understand how fraud occurs across the payments industry. The FraudClassifier model is not intended to result in mandates or regulations, and does not give any legal status, rights or responsibilities, nor is it intended to define or imply liabilities for fraud loss or create legal definitions, regulatory or reporting requirements. While sharing and use of the FraudClassifier model throughout the industry is encouraged, any adoption of the FraudClassifier model is voluntary at the discretion of each individual entity. Absent written consent, the FraudClassifier model may not be used in a manner that suggests the Federal Reserve endorses a third-party product or service.