Scams are a growing and costly problem for the payments industry. In 2022, the Federal Trade Commission (Off-site) reported $8.8 billion in losses from scam activity, a 30% increase from the previous year.
As a result, the Federal Reserve formed a scams definition and classification work group of payments and fraud experts earlier this year. The goal is to provide a more consistent foundation for scams reporting to help the payments industry better understand and mitigate the problem. The work group recently recommended a definition to align payments stakeholders on a common view of scams and foster more consistent dialogue about how to improve scam detection and mitigation, education and reporting. Ultimately, the definition can help advance more consistent identification and classification of scams across the payments industry.
The group recommended the following operational definition of scams: the use of deception or manipulation intended to achieve financial gain.
This straightforward definition was designed to apply to both attempted and successful scams, but does not address liability, reimbursement or reporting requirements. It is intended to foster more consistent scams classification methods among financial institutions, payment networks, technology solution providers and industry trade organizations. Other potential user groups include government agencies, law enforcement, academia, telecommunications companies and social media platforms.
ACTION ITEM:
Visit FedPayments Improvement (Off-site) for updates on this initiative and other efforts to support payment security and fraud mitigation.
Note
The scams definition was developed by a cross-industry work group to provide a consistent way to identify and classify this type of fraud across the payments industry. This definition is not intended to result in any regulatory or reporting requirements, imply any liabilities for fraud loss or confer any legal status, legal definitions or legal rights or responsibilities. While use of this definition throughout the industry is encouraged, adoption of the definition is voluntary at the discretion of each individual entity. Absent written consent, this definition may not be used in a manner that suggests the Federal Reserve endorses a third-party product or service.
