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Read our latest white paper: Detecting Synthetic Identity Fraud in the U.S. Payment System

Detecting synthetic identity fraud can be a tough challenge, even though “Know Your Customer” processes and other tools provide financial institutions with a reasonable information about their customers’ identities. The Federal Reserve recently published the second white paper in its Payments Fraud Insights series, Detecting Synthetic Identity Fraud in the U.S. Payment System (Off-site), to inform industry professionals about the characteristics and behaviors that indicate potential synthetic identities in the account application, “sleeper” and “bust-out” phases.

Some industry experts consider synthetic identity fraud to be the fastest-growing type of financial crime in the United States, one that cost U.S. lenders an estimated $6 billion and accounted for 20% of credit losses in 2016. Synthetic identity fraud occurs when fraudsters combine fictitious and/or real information to create new identities with the intent of defrauding financial institutions, government entities and individuals. Because synthetic identities can behave like legitimate accounts, traditional fraud detection models may not flag them as suspicious or fraudulent. A financial institution may not identify an account holder as synthetic until after the perpetrator busts out and the collections team is unable to locate a real person to pay the debt. Common characteristics of synthetics include multiple identities with the same Social Security number and accounts created using the same Internet Protocol (IP) address, physical address or phone number.

Fraudster tactics continually evolve to stay a step ahead of detection, resulting in significant losses for the payments industry. The Federal Reserve is publishing these white papers to encourage information sharing among payments stakeholders and law enforcement, which is critical to help us all keep up with the evolving threat posed by creative synthetic identity fraudsters.

Jim Cunha Secure Payments and Fintech Division Head
Senior Vice President, Federal Reserve Bank of Boston

The Federal Reserve began raising awareness and encouraging action on the growing problem of synthetic identity payments fraud in late 2018. Through primary and secondary research and industry dialogue, we seek to improve understanding of the issue, create a greater sense of urgency about addressing it and promote industry action to both identify and mitigate this type of fraud. The final installment in our Payments Fraud Insights series will describe mitigation approaches to address this type of fraud.

Action Item:

Be sure to read the Federal Reserve’s second Payments Fraud Insights white paper, Detecting Synthetic Identity Fraud in the U.S. Payment System (Off-site). For more information on synthetic identity fraud, you can:

  • Federal Reserve names Ken Montgomery program executive of newly announced FedNowSM Service
  • Federal Reserve publishes white paper on synthetic identity payments fraud
  • In This Issue


    Scheduling a Check Services test is right at your fingertips

    Want to test your check operations due to a new receiving point, a platform change or contingency purposes? You can now schedule a test on FRBservices.orgSM. The Federal Reserve Banks will send your institution a data test file with sensitive customer data replaced with generic masking data. All transactions in the test file will contain the original customer account number and item dollar amount to enable successful testing.

    Visit the Check Services Testing Opportunities page to find out more and schedule a test. You will be prompted to complete a request form. Keep in mind that tests can be scheduled Tuesday through Friday, excluding Federal Reserve Bank holidays. Don’t forget that you can also schedule a test for FedACH® Services.

    For more information on our services, visit the FedACH Products & Services and Check Product & Services pages or contact your account executive.

    In This Issue


    FedTransaction Analyzer® assists with post-merger activities

    Post-merger analysis and integration can be quite stressful for surviving institutions. This stress can frequently be caused by gaps in available transaction data associated with the non-surviving institution. Did you know that the FedTransaction Analyzer® tool can help?

    After a merger, surviving institutions using FedTransaction Analyzer will have immediate access to the non-surviving institution as a sub-account for Fedwire® Funds Service data. By accessing the post-merger data from non-surviving institutions, users can perform extended research of up to seven years of historical trends, which then can be used to:

    • Validate final incoming wire transactions using the Originator Identifier Research Report – Monitor which customers are receiving wires on non-surviving routing numbers after the merger takes effect to help ensure a seamless transition period for customers
    • Comply with investigations using the User-specified Report – Review historical transaction data to help comply with internal or legal investigations related to the non-surviving institutions, which eliminates the need to backload wire details and assists with research regardless of the wire platform of the acquired institution
    • Inform future agreements by identifying top customers of non-surviving institutions using the Customer Activity Dashboard – Utilize non-surviving institutions’ data to appropriately determine historical activity patterns for contract evaluations
    • Monitor international wires to gauge potentially exceeding thresholds using the Originator Identifier Research Report – Small and medium financial institutions can view international wire activity to evaluate critical transfer rule compliance obligations
    • Analyze volume and value operational patterns using the Time of Day Activity Dashboard – Reassess operational staffing needs based on non-surviving institutions periods of high transaction volume
    • Upload non-survivor customer data into you compliance applications – Review historical data to evaluate behavior patterns for new acquired customers in a timely manner

    Action Item:

    In This Issue


    Review 2019 FedACH® activity with the ACH Routing Number Activity Report

    Would you like to see your institution’s FedACH® Services activity for all of 2019? The ACH Routing Number Activity Report in the FedPayments® Reporter Service for FedACH Services is designed to generate that information for you. This automated, scheduled report option:

    • Provides summary-level information for originated and received entries processed via FedACH® Services for a specified ABA
    • Is generated on the first business day of the month and shows information for the previous month and calendar year to date
    • Can also be generated on an ad hoc, on-demand basis for any one of the previous three months and will carry the year-to-date activity for that month back to the beginning of the corresponding calendar year
    • Includes entry counts, addenda counts, forward entries, returned entries, notification of change (NOC) entries, pre-notification entries, enrollment (ENR) entries, operator rejects, dollar values, debits, credits, commercial and government entries and originated and received entries

    Action Item:

    View a sample of the ACH Routing Number Activity Report or read report descriptions to learn more. If you would like your account executive to contact you, please complete our contact request form (Off-site).

    In This Issue


    Fed Facts: What makes a federal holiday?

    Throughout the year, select government offices and many financial institutions are closed to observe designated holidays. In the United States, a federal holiday is one that is recognized by Congress and is designated in Title V of the U.S. Code 6103 – Holidays, which allows Congress the authority to create holidays for federal institutions. As the year comes to a close and a few of these federal holidays start to approach, we decided to recap some of the history behind these holidays.

    Federal holidays throughout history

    In 1870, Congress designated the first federal holidays: New Year’s Day, Independence Day, Thanksgiving Day and Christmas Day. At the time, holiday benefits were only allotted to the approximately 5,300 federal employees working in Washington, D.C. Federal workers located elsewhere in the country – around 50,600 employees – did not receive holiday benefits until 1885. Since the initial four holidays were designated, there have been over 1,100 proposals to establish federal holidays. Only 11 have been approved by Congress, with the most recent being Martin Luther King Jr. Day in 1983.

    Observing federal holidays

    On federal holidays, all non-essential federal government offices, as well as many financial institutions, are closed for business. Although these holidays are often observed throughout the whole country, they are not “national holidays.” Therefore, each state can individually decide whether or not to legally observe a federal holiday. In fact, even though many states recognize most, or all, federal holidays as state holidays, the federal government cannot enact laws requiring them to do so. Likewise, states can observe local and city holidays that are not recognized at the federal level.

    Federal Reserve Bank holidays

    The Federal Reserve Banks observe all federal holidays and are closed for business as outlined below. For holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday. For holidays falling on Sunday, all Federal Reserve Banks and Branches will be closed the following Monday. An expanded schedule can be found on the Board of Governors' website (Off-site).

    Be sure to bookmark the Holiday Schedules page, and visit the Fed360® Dates to Remember page, to keep track of upcoming holidays.

    New Year's Day Jan 1 Jan 1
    Martin Luther King Jr. Day Jan 21 Jan 20
    Presidents Day Feb 18 Feb 17
    Memorial Day May 27 May 25
    Independence Day July 4 July 4
    Labor Day Sep 2 Sep 7
    Columbus Day Oct 14 Oct 12
    Veterans Day Nov 11 Nov 11
    Thanksgiving Day Nov 28 Nov 26
    Christmas Day Dec 25 Dec 25


    Federal Holidays: Evolution and Application (Off-site)

    In This Issue