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Fed360

Federal Reserve launches new work group to advance ACH, wire and check fraud data

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.

  • Federal Reserve Payments Study shows increased payments fraud
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    FedACH® Exception Resolution Service now open to resolve your cases

    Resolving Automated Clearing House (ACH) exceptions just became a lot easier. As of April 8, the FedACH® Exception Resolution Service is now available to all FedACH customers. This service allows financial institutions to manage ACH exception cases through the FedLine Web® or FedLine Advantage® Solutions.

    FedLine® Subscribers with the role of “FedACH Exception Resolution Service” can begin viewing and responding to cases received from other participating FedACH customers. You can access the service in FedLine under the FedACH tab by clicking on the Exception Resolution Service link.

    Partial Service Participant mode

    All current FedLine Subscribers with the role of FedACH Information Services, and the ABAs their roles are associated with, are automatically enrolled in the new Exception Resolution Service Subscriber role in a Partial Service Participant mode. This mode allows financial institutions to only respond to ACH exception cases they receive through the service. This initial automatic enrollment was a one-time event, and no fees will be assessed for these Subscribers’ use of this Partial Service Participant mode.  

    Full Service Participant mode

    The Full Service Participant mode provides the same functionality as the Partial Service Participant mode, plus the ability to open ACH exception cases. The Full Service Participant mode is available to existing Exception Resolution Service Subscribers and all other FedACH customers.

    Offline Service Participant mode

    The “offline” version of the service is also available for financial institutions that wish to process ACH exceptions outside of a FedLine connection and have a low number of exception cases per month.

    Action Item:

    Financial institutions interested in the Full Service Participant mode must complete Part 6F (PDF) of the FedACH Participation Agreement. Your institution will be billed the associated monthly participation fee and a per-case fee.

    Please contact your account executive or FedACH and Check Services Customer Support with questions. We appreciate your support and look forward to continuing to provide you with high-quality and efficient payment services.

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    Dual Automated Loan Deposit collateral report submission period begins in May 2019

    As initially announced in November 2017, the Federal Reserve will begin incorporating additional loan fields in Automated Loan Deposit (ALD) collateral reports submitted by select depository institutions. These fields will be used to calculate margins and internal fair market value estimates for loan collateral pledged to the Federal Reserve. To facilitate this effort, certain “in-scope” institutions will be required to provide additional loan fields in a new format in their ALD collateral reports. Beginning next month, these selected institutions must submit both the current ALD collateral report as well as the newly formatted ALD collateral report with the additional loan fields. This dual loan file submission is expected to last approximately 18 months.

    Do all institutions need to submit both pledge loan file types?

    No, only the following “in-scope” institutions are required to submit the additional loan fields beginning in May 2019:

    • All depository institutions that are underneath a bank holding company (including a financial holding company) or an intermediate holding company with greater than $50 billion in total consolidated assets, which is defined as the average over the last four calendar quarters
    • All foreign banking organizations
    • All other domestic institutions with greater than $50 billion in total consolidated assets, which is defined as the average over the last four calendar quarters

    Institutions that met the “in-scope” definition as of November 28, 2017, have already been contacted to ensure awareness of the new requirements. If your institution becomes “in-scope,” the Federal Reserve will contact you at that time to inform you of the need to comply with the new requirements. However, your institution may voluntarily participate in the new ALD collateral reporting requirements at any time. Please contact your local Discount Window collateral staff (Off-site) in order to pursue this option.

    Institutions that are not required to submit additional loan fields and do not voluntarily participate do not need to take any action and should continue to submit their ALD collateral reports in the current format.

    Questions regarding the new ALD collateral report submission requirements can be sent to SYS.ALD.Info@bos.frb.org. Institutions may also contact their Federal Reserve Bank’s Discount Window collateral staff (Off-site) with other inquiries.

    What are “in-scope” institutions required to do at this time?

    Beginning in May 2019, “in-scope” depository institutions must submit both the existing ALD collateral report as well the new ALD collateral report with the additional loan fields each month. The existing ALD collateral report will be used for valuation and margining purposes, while the new ALD collateral report with the additional loan fields will be used to test and calibrate the new margins and internal fair market value estimates. Once this process is completed, the new ALD collateral reports will then be used to assign collateral values. The effective date for the new collateral values will be announced in a subsequent communication. The dual loan file submission process is expected to last approximately 18 months, after which only the new ALD collateral report with the additional fields will need to be submitted. The new ALD collateral report submission requirements can be viewed on theNew ALD Collateral Requirements (Off-site) page of the Discount Window website.

    Action Item:

    As a reminder, the current and newly formatted ALD collateral reports should contain the same set of pledged loans. The newly formatted ALD collateral reports submitted in May 2019 must be complete and represent your institution’s actual pledged loan population.  Please note that the Federal Reserve will be undertaking an effort to validate the additional loan fields that you submit. Your local Federal Reserve Bank will contact you for assistance in performing this work.

    How should my institution transmit the new ALD collateral report to the Federal Reserve?

    “In-scope” institutions should have already developed the new ALD collateral report in accordance with the previously communicated standards, which can be found in the New ALD File Format Specifications (Off-site) document. Your institution should submit these files in an approved method of secure transmission (Off-site). The new ALD collateral reports should be transmitted at the same frequency and with the same “as-of” date that existing ALD collateral reports are today.

    Institutions that are not required to submit any additional loan fields do not need to make any changes to their ALD collateral report submission practices. Institutions submitting additional loan fields can find information in the New ALD File Format Specifications (Off-site) document.

    What happens if my institution doesn’t provide the requested loan fields?

    During the dual loan file submission period, beginning in May 2019, no adjustments will be applied for missing data fields. However, once the newly formatted ALD collateral reports are used to assign collateral values, “in-scope” depository institutions that fail to submit the new loan fields may receive either a zero or default value for pledged loans that are missing required loan fields. Institutions that anticipate difficulties in providing the requested loan fields should contact their local Reserve Bank prior to the submission deadline to resolve any issues.

    How will collateral values be affected for institutions that are not required to comply with the new ALD collateral reporting requirements?

    At this time, collateral values for institutions that are not required to comply with the new ALD reporting requirements will be unaffected. However, upon the implementation of the new internal models at a later date, the Federal Reserve will utilize the same internal model to derive values for all loan collateral pledged by any institution. Institutions that are not required to comply with the new ALD collateral reporting requirements will receive values based on the newly required loan fields provided by the “in-scope” institutions. These values, in addition to the loan fields that are currently reported to the Federal Reserve, will be used to assign margins and internal fair market value estimates for pledged loans. This process will take effect once the testing and calibration of margins and internal fair market value estimates are complete.

    Where can I get more information?

    Please review the related announcement on the Discount Window & Payment System Risk (Off-site) website or contact your Reserve Bank’s Discount Window collateral staff (Off-site) for additional information. Questions regarding the new ALD collateral report requirements can be sent to SYS.ALD.Info@bos.frb.org.

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    Fed360

    Longer reporting periods available now in FedTransaction Analyzer®

    Based on customer feedback, FedTransaction Analyzer® now allows financial institutions with multiple settlement relationships to access longer reporting periods when downloading their historical Fedwire® Funds Service activity. These reporting periods range from five days to 18 months and are set for each institution based on its volume of transactions and number of settlement relationships. The reporting period for your particular institution can be found within the FedTransaction Analyzer user interface when entering specific date ranges for new reports.

    FedTransaction Analyzer provides a concise and consolidated view of master and sub-account activity. As a network hub, FedTransaction Analyzer consolidates Fedwire information despite operational complexities. This consolidation removes critical barriers to understanding historical information for many operational activities, such as subpoenas for wires from acquired routing numbers, or technology complications like varied platforms and connections. FedTransaction Analyzer also makes your institution’s relationship to each transaction transparent with sent, received, or on-us (transferred within the master account family) designations in analytic views.

    We encourage you to log in and enjoy the growing level of information available to you.

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    Fed360

    Stop by booth 601 at PAYMENTS 2019

    Federal Reserve Bank product managers and account executives are excited to be attending the PAYMENTS 2019 (Off-site) conference hosted by NACHA® on May 5-8 in Orlando, Florida.

    Visit booth 601 to discuss how we can help you meet your financial services needs. We will be sharing information on our full suite of FedACH® products and services, including one of our newest products, the FedACH Exception Resolution Service. This service allows FedACH Services customers the ability to manage Automated Clearing House (ACH) exception cases with other FedACH customers through the FedLine Web® or FedLine Advantage® Solutions. We will also be chatting about our other offerings to help support your payments business, including FedACH Risk® Management Services and the FedPayments® Reporter Service for FedACH Services.

    Note

    "NACHA" is a registered trademark of NACHA - The Electronic Payments Association.

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    Fed Facts: Check out a Fed museum during your springtime travels

    With spring in full swing, warm temperatures have arrived and many are making travel plans to enjoy tourist destinations. Are you planning to travel to a city where a Federal Reserve Bank is located? Did you know that many Federal Reserve Banks have their own museums that you can visit? Below, we feature museums located in the Second and Third Districts – if you are visiting the East Coast this season, be sure to check out the museums at the Federal Reserve Banks of New York and Philadelphia!

    See all that shines at the Museum & Gold Vault Tour (Off-site)

    At the Federal Reserve Bank of New York, located in the Financial District in Lower Manhattan, you can experience a tour of the world’s largest known depository of monetary gold. You can learn about the history of storing gold at the New York Fed and how it has changed over the years. Tour guides will also explain the roles and responsibilities of the Federal Reserve. Learn more about making tour reservations for school groups and the general public.

    Experience the rich history displayed at the Money in Motion (Off-site) exhibit

    Over 300,000 visitors have been to the Money in Motion exhibit at the Federal Reserve Bank of Philadelphia. This exhibit will teach you about money, banking and the Federal Reserve System. Philadelphia is deeply rooted in our nation’s financial history – it is home to the first bank of the United States. Historical highlights you can discover at the Money in Motion exhibit include viewing money from the original 13 colonies, seeing a rare $100,000 bill and testing your knowledge of money against Benjamin Franklin. The Philadelphia Fed is open to nonscheduled visits for individuals or groups of fewer than 10 people. For a larger group, you can book your visit (Off-site) in advance.

    Check out the table below for a listing of complimentary Federal Reserve Bank tours and exhibits.

    LocationsTours and Exhibits
    Board of Governors Prearranged tours (Off-site) of the Board’s Eccles Building in Washington, D.C. may be requested for groups of 10 to 25 people. The Board also presents a series of exhibitions annually as part of its Fine Arts Program (Off-site).
    Federal Reserve Bank of Boston The Boston Fed does not have an exhibit or offer building tours.
    Federal Reserve Bank of New York Learn more about the New York Fed’s Museum & Gold Vault Tour (Off-site) beyond the highlights above.
    Federal Reserve Bank of Philadelphia The Money in Motion (Off-site) exhibit has even more to offer than the features above.
    Federal Reserve Bank of Cleveland Take a group tour of the Cleveland Fed or schedule a guided tour of the Money Museum (Off-site).
    Federal Reserve Bank of Richmond The Fed Experience (Off-site) is an educational exhibit brought to you by the Richmond Fed.
    Federal Reserve Bank of Atlanta Visit the Atlanta Monetary Museum (Off-site) or tour (Off-site) the Atlanta Fed and two of its branches in Jacksonville or Miami.
    Federal Reserve Bank of Chicago Check out the Chicago Fed's Money Museum (Off-site) and have your photo taken by our $1 million exhibit! You can also tour the Detroit Branch Visitors Center (Off-site).
    Federal Reserve Bank of St. Louis There’s plenty to see at the Inside the Economy® Museum (Off-site) located at the historic St. Louis Fed, including interactive displays, sculptures and videos.
    Federal Reserve Bank of Minneapolis Private group tours (Off-site) and public tours (Off-site) of the Minneapolis Fed are available with advance registration.
    Federal Reserve Bank of Kansas City Visit the Kansas City (Off-site) and Denver (Off-site) Money Museums.
    Federal Reserve Bank of Dallas Stop by the Dallas Fed to see The Economy in Action (Off-site) exhibit. You can also tour (Off-site) the Dallas Fed and two of its branches in El Paso and Houston.
    Federal Reserve Bank of San Francisco The Fed Center: Exploring our Nation’s Central Bank (Off-site) at the San Francisco Fed is designed to teach the public about the functions of the U.S. central bank. Tours (Off-site) are also available at the San Francisco Fed and its branches in Los Angeles, Phoenix, Salt Lake City and Seattle.

    Be sure to keep these museums and exhibits in mind as your plan your travel in the future! Check out the links above for each location’s hours, directions and entry requirements. Many of the museums above also include virtual tours that you can enjoy in the comfort of your own home.

    Notes

    “Inside the Economy” is a registered trademark of the Federal Reserve Bank of St. Louis.

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