Legislators Zero in Checking Fraud Crisis
Regulators and lawmakers are re-examining payment fraud, and as a result, federal actions could be addressed to the growing challenges of check fraud.
On Monday (June 16), three regulators, including the Federal Reserve, including the offices of the monetary auditors and the Federal Deposit Insurance Company, issued a public opinion demand, focusing on check theft and scams.
The notice, published in the Federal Gazette, details “The increase in check fraud is particularly noteworthy. Many sources report increased levels of check fraud in recent years, although overall reduced check usage. Inspections can be stolen, altered or forged. For example, the physical nature of paper inspections makes it easy to search in cases where it is not caused or reviewed in places where it is not caused, or to be within the scope of the cause, or to encounter verification in the product and service process. Given that the inspections do not contain clear security features in nature, the degree of effectiveness.”
“We need a comprehensive strategy to develop and implement an effective, coordinated approach designed to prevent payment fraud and assist consumers, businesses and supervisory agencies,” Michelle Bowman, vice chairman of the Federal Reserve's oversight, said in a statement Monday. She called the inter-agency request for comments a “welcome first step.”
Standards and technology
As for the campaign to certain frameworks, requests that began in the 90-day comment period include “What type of collaboration, including standard settings, most effectively address payment fraud? These questions also ask “Is the increase in cooperation between federal and state agencies helping to detect, prevent and mitigate payment fraud? If so, how? ”
More generally, these agencies ask: “What measures, including technical solutions or services, are most effective in identifying, preventing and mitigating payment fraud at your agency? Is there any action that can be taken, for example, consumers can take the help of the helping agency?
PYMNTS noted that in the financial services sector, the regulator’s request for comment was the most obvious and obvious joint effort. It happened several months after President Trump's executive order required federal agencies to stop banning invoices and accept payments by September 30. According to the fact sheet, these institutions will transition to direct deposit, debit card payments, digital wallets, real-time transfers and other electronic funds transfers (EFT) methods.
Last week, the Senate debuted legislation to create a working group focused on payment fraud. Statistics show that individual check fraud accounts for the Fed's estimated $234 billion in losses.
The legislation, known as the “Working Group to Recognize and Avoid Payment Scams”, is sponsored by Mike Crapo of R-Idaho and Mark Warner of D-VA. The bill will create a task force chaired by the U.S. Treasury Department and consist of Prudential regulators, the Consumer Financial Protection Bureau, the Federal Communications Commission, the Federal Trade Commission, the U.S. Department of Justice and Industry Representatives. Based on the details available here, the task force will compile a report to recommend legislative and regulatory changes “including best practices for coordinating state, local and federal efforts.”
Fed Financial Services Financial Institutions Risk Officials of the Year recently estimated that the number of financial institutions that lost money due to check fraud increased by 10% year-on-year.
In an interview with PYMNTS CEO Karen Webster, Rusty Pickering, president and COO of INGO Payments (providing inspection risk management technology), said, “even with all the flaws, checks continue to be “the only universal payment tool – a universal payment tool that is generally available for sending and receiving. … I don’t need anything else to pay by check than your name, payments, and payments are made. 80% of companies are still processing and mailing paper checks to other companies, especially when paying to consumers.
He continued: “The weak link in payment is paper checks because when you post it in the mail, it’s easy to get stolen.”
INGO CEO Drew Edwards said in another interview with Webster that the government’s mission is to get rid of the checks (he said it was a “fraud magnet” of 2022): “No one thinks the checks will stay here forever. It’s a question. It’s a question of how we can build railroads, collect data, and guarantee government security that the government can trust a fully digital process.”
