Federal Reserve Showing Commitment to Fraud Prevention and Detection?
- Fed elevates consumer fraud to systemic risk, demanding stronger bank‑level defenses.
- Banks must invest in data, analytics, and collaboration to counter rising fraud.
- Fed plans new tools, guidance, and standardized fraud vocabulary to improve detection.
Coming off the recent publishing of their Financial Services Risk Officer Survey, the Federal Reserve’s has taken the next step in spotlighting the fraud challenges by elevating consumer fraud as a priority issue -- a clear signal that fraud risk has become a systemic concern, not just a customer-service problem. For banks and payments providers, this shift should accelerate investments in data, analytics, and collaboration across the ecosystem.
In remarks this week reported by PYMNTS.com, Federal Reserve Vice Chair for Supervision Michelle W. Bowman framed consumer fraud as a direct threat to the integrity and reliability of the financial system. Nearly every fraud event now touches a bank account or payment, blurring lines between “consumer scams” and “core payments risk.” The FED is reviewing more than 250 comment letters gathered with the FDIC and OCC to inform new guidance and resources for banks.
The Fed’s 2025 “Survey of Household Economics and Decisionmaking” found that 21% of American adults experienced financial fraud or scams in 2024, Bowman said.
Additionally, non‑card fraud generated an estimated net loss of roughly $63 billion for consumers. More than half of those non‑card events involved a bank account product, and nearly 40% of reported losses flowed through bank transfers and payments.
Why Trust Matters
The relationship between consumers their financial institutions must be built on a strong foundation of trust. Ms. Bowman notes that "our banking system runs on trust — the belief that accounts are secure and customers can transfer money safely and reliability.”
A recently published infographic from the American Bankers Association displays how deep the trust goes:
- 9 in 10 agree their bank takes proactive steps to protect them from fraud/scams
- 3 in 4 believe their bank does more than businesses in other industries to protect them from fraud/scams
- 3 in 5 received a fraud alert from their bank alerting them to suspicious activity
- 96% found their bank’s fraud alerts valuable
- 60% are concerned with government regulations stopping all messages, including fraud alerts
Unfortunately, when an individual is a victim of fraud, it typically leads to an emotional response; many of the victims blame their financial institutions even when the FI holds none of the responsibility.
Modernizing Fraud Detection
The US Government is looking to put "their money where their mouth is." In addition to the Fed’s collaboration with state and local partners to combat fraud, Ms. Bowman highlighted that Treasury Secretary Scott Bessent and Federal Communications Commission Chairman Brendan Carr are planning a public-private roundtable. During this session, participants will be invited to share effective fraud prevention strategies and provide input on how the government can further support these efforts.
Furthermore, the Fed is strengthening the fraud-related tools and services it offers to banks across its payment platforms. Ms. Bowman noted that the Fed is partnering with the banking industry to establish a common vocabulary for different types of fraud, enabling institutions to more effectively identify and combat these schemes.
On the banking side, it's become more important than ever to strengthen fraud defenses with the latest technologies, including AI. Many banks are seeing fraud detection rates of over 95% for payments like checks by leveraging these technologies in a multi-layered framework -- interrogating each check payment with multiple layers of technologies to ensure that the transaction is legitimate.
Unfortunately, fraud and scams show no signs of diminishing; banks and other financial organizations must play their role in combating fraudulent activity.