Massive Fraud Against State Unemployment Insurance Programs
NEACH is currently working on identifying the ODFIs for the state unemployment offices, to answer the following questions:
1) How are the entries formatted?
You will want to know this, so that you if your able and wish to do additional screening for fraud you can. We are currently awaiting information to answer this question.
2) What is the best return code to use if the fraud is spotted beyond the normal return time frame?
The entries have a name mismatch so if spotted in time an R03 would work fine but some FIs are concerned the return will be dishonored. This maybe unlikely but we want to know that for sure.
Based on our research, we have the following update regarding return codes:
Return codes within the timeframe:
> R03 – When there is a mismatch name
> R16 – If action has been taken to restrict the account
> R-17 – When there is questionable activity
Return codes when outside of the two-day timeframe:
> R-06 – For use with permission from the ODFI
> R-23 – Acceptable for use in this circumstance
3) Can an RDFI delay availability on ACH Payments if they suspect Fraud?
Yes, the Nacha Operating Rules allow for the delay in availability requirements if an RDFI reasonable suspects that a credit Entry is unauthorized. The RDFI is instructed to reach out to the ODFI promptly in these cases. This is not an unlimited time. There are REG CC requirements for posting of electronic items that still must be met (First Business Day Following Banking Day of Deposit). You may have rights within your account agreements as well. RDFIs should follow processes it would anytime fraudulent activity occurs on an account.
4) What is the liability to the RDFI?
These entries are commercial items (non-government) are subject to the Nacha Operating Rules, which are clear that an RDFI may rely solely on account number for posting. The ODFI warrants that the information in the entry is accurate and the entry itself is lawful. This is not the responsibility of the RDFI under the Rules. The RDFI can certainly help stop this fraud or at least help stop the fraudulent funds from being withdrawn. The rules allow for an RDFI that suspects a credit is fraudulent to delay availability up to 1 day.
The money mule needs to get the funds out from the account at the RDFI and this is where RDFIs with strong monitoring systems can have the biggest impact. Newly opened accounts or accounts that have been dormant all of sudden are receiving ACH deposits from the state unemployment offices into the account and then immediately trying to either move the money out through online banking or at an ATM could and probably should trip an alarm.