Trends & Research

Trends & Research

Access the power of data and objective insight. Data from various sources, including NEACH surveys and member interviews, is compiled and made available as white papers, case studies, articles, benchmarking, and industry reports to provide a snapshot of both the current and future payments landscape. 

Published on Monday, July 6, 2020

The Federal Reserve’s Timely Release of the FraudClassifier Model

The Federal Reserve announced recently the release of its FraudClassifierSM Model—a set of tools and materials designed to help classify and understand the magnitude of fraudulent activity across the payments industry. The Fed developed the FraudClassifier Model to help address the industrywide challenge of inconsistent classifications for fraud involving ACH, wire, or check payments.  


The release of Fed’s FraudClassifier comes at a time when financial institutions are seeing an uptick in fraud due to the ripple effects of COVID-19.


“We know the bad guys never miss the opportunity to take advantage of a bad situation,” Jim Cunha, secure payments strategy leader and senior vice president at the Federal Reserve Bank of Boston says. “More banking is occurring online, which may reduce the effectiveness of current fraud detection models. Fraud institutions must be even more vigilant today.”


Americans have lost $13.44 million dollars to coronavirus-related fraud from January 1 until today, according to the Federal Trade Commission (FTC). The amount is based on18,235 reports the FTC received from consumers, Paul Witt, lead data analyst with FTC’s Division of Consumer Response and Operations, said on his blog. Other government agencies, like the Internal Revenue Service (IRS) and the Social Security Administration (SSA) are also reporting upticks in fraud.


Adding to the complexity, “More legitimate customers are struggling to pay loans, making it harder to see synthetic identities ‘busting out’ – the process of maxing out a line of credit with no intention to repay,” Cuhna says.  “The FraudClassifierSM Model was designed to help organizations ensure greater internal consistency in fraud classification, more robust information and better fraud tracking, which we believe may be especially useful in light of these issues.”


Developed by the Fraud Definitions Work Group, which was comprised of Federal Reserve and payments industry fraud experts, “the Model uses a series of questions, beginning with who initiated payment to differentiate payments initiated by authorized or unauthorized parties,” according to The result is a holistic picture, which supports more strategic fraud management.


According to the website, the benefits of adopting the FraudClassifier Model include: facilitating consistent fraud information and tracking, improving customer education, understanding fraud across payment types and fraud methods, speaking the same language about fraud, and more.


The FraudClassifier Model is available as a free resource to all institutions. To learn more and to access additional tools, visit


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