Dive Brief:

• The Federal Deposit Insurance Corporation, Federal Reserve Board and the Office of the Comptroller of the Currency on Monday proposed taking new actions to address payments fraud, especially paper check fraud, suggesting increased agency collaboration, more industry education and improved supervision.
• The federal bank regulatory agencies offered their request for public comment over the next 90 days, saying in a joint press release that they would also look for ways to work state regulatory agencies.
• “Today's interagency announcement is a welcome first step in the efforts of the federal banking agencies to combat the increasing occurrence of fraud, particularly check fraud,” the Fed’s vice chair for supervision,  Michelle Bowman, said in the statement. “While this has been a well-known problem for several years, efforts by regulators have been slow to advance, and seem to have done little to address this growing threat.”

Dive Insight:

As part of the joint action, Bowman said in the statement that there needs to be a broader, coordinated approach to combating check fraud. She noted that she would work with state and federal agencies as well as law enforcement for the new effort.

She cited financial institutions and consumers as suffering from check fraud. “Check fraud has grown substantially over the past several years, resulting in harm to banks, especially community banks, and the consumers and businesses who are the victims of fraud,” she said.

As part of the proposal, the regulatory agencies also said in the release that they would pursue more data collection regarding fraud and opportunities for information sharing. In addition, they would review ways to use the Federal Reserve Banks’ tools and services in new ways as another means of reducing fraud.

In March, President Donald Trump signed an executive order mandating federal agencies to stop using paper checks, partly because of rising fraud.

The Fed’s move comes a week after a bipartisan group of U.S. Senators pushed to address the growing problem of fraud in payments. They proposed legislation that would create a task force to study payment scams and suggest ways for lawmakers and regulators to combat them, along with formulating industry best practices.

The bill, if it moves forward in Congress, would represent one of the first formal federal efforts to combat payments fraud amid a call from professionals in financial services for a national campaign against the multi-billion-dollar problem. Payments fraud has become well-documented scourge perpetrated not only through check fraud, but also via digital avenues involving social media, online commerce and mobile text messaging.