FraudCHECKER includes a battery of tests that are applied to EVERY transaction in the inclearings and ACH files. It is the foundation of the overall system.
Overview
The JMFA FraudMANAGER® system will analyze transactions using multiple tests based on factors such as:
- Account ownership (Consumer/Commercial/Internal)
- Date opened
- Historical activity
- Transaction source (ACH/MICR)
- PaperPIN/RestrictivePAY/PositivePAY restrictions
- Transaction detailed information
Every institution has parameters they may tweak to meet their specific risk criteria. The Exception Tests flag transactions that should be reviewed to determine if they are fraudulent items.
The following are examples of "Exception Tests" produced by the JMFA FraudMANAGER® system:
Large Item Exceptions (MICR & ACH)
In general, large items represent the greatest risk to an institution, but historically only one limit has been used for all accounts and only on the MICR items. JMFA FraudMANAGER® includes both the MICR and ACH transactions and establishes different LARGE-ITEM limits for the account ownership types.
An ADAPTIVE LARGE ITEM test has been developed that analyzes the historical activity on an account to determine what would represent a large-item for each specific account. Multiple algorithms are offered to provide a sophisticated and automated determination of this value for every account.
Every item that exceeds the LARGE ITEM LIMIT that is not associated with a TRUSTED ACH ORIGINATOR or APPROVED RECURRING MICR AMOUNT will show as an item that should be reviewed. The items can be accepted, rejected or bypassed.
New Account Exceptions (MICR & ACH)
Many institutions use the Regulation CC limit of 30 days for restricting or conducting additional reviews to new customers. Criminals are very aware of the 30-day policy and therefore are delaying fraud until the accounts have aged past one month.
JMFA FraudMANAGER® has the capability of setting a NEW ACCOUNT day limit to any number of days. There is a separate LARGE ITEM limit that is applied to these accounts, regardless of the account ownership type.
Check Size Exceptions (MICR only)
The system will assume that checks may be either PERSONAL or COMMERCIAL sized. Consumers will normally use the PERSONAL sized checks and Commercial and Internal will normally use COMMERCIAL sized checks. There may be accounts that use both sizes and the opposite from the expected. These accounts may be updated on an individual basis. The system will look at the MICR data and attempt to determine if the incorrect check size is on the item, indicating a draft or potential counterfeit.
Duplicate Check Exceptions (MICR & ACH)
Any item that is a check or ACH check conversion is checked to determine if the serial number has been previously processed AND the AMOUNT IS DIFFERENT. If the amount for the prior presentment is the same, the system assumes the item was returned for some reason, such as NSF. However, it the AMOUNT IS DIFFERENT, the system will flag the item as an exception since it would indicate one of the items is a counterfeit. (This is a VERY HIGH RISK exception)
Out-of-Range Check Number Exceptions (MICR & ACH)
JMFA FraudMANAGER® will attempt to create anticipated check ranges dynamically as items are added to the database. If an item appears to fall outside all the expected check ranges, it will be flagged as an exception. The system will get more accurate over time, but this test is designed to detect potential counterfeits, bill payments or drafts.
No Check Number (draft/keypunch suspects) Exceptions (MICR only)
Items that do not have a check number represent a greater risk because they indicate that it was not originated by the customer, such as a draft. It can also indicate that the item has poor MICR formatting or ink. In any case, they should be reviewed. Recurring drafts for the same amount can be APPROVED so they will not be flagged as an exception in future months. This test may be turned off if desired, or only triggered if the item exceeds the separate Large Item threshold for this test. ACH items will fail the ACH Compliance test if they do not have a serial number on a check conversion transaction.
Low-Speed Exceptions (MICR Only)
Any item that is in a Low-Speed may represent a greater risk because they indicate no or poor MICR. A separate Low-Speed limit is established for these items. This test is only possible on the FRB-SOP file where the LS batch indicator is present.
Multiple Submissions of Items (MICR Only)
Check 21 has arrived and there have been cases where an item is submitted more than one time due to a processing error. The system can check for any item that is presented more than one time within several days, since it would represent a duplicate submission. The system will check for MICR or IRD transactions since they could appear in either form.
ACH Trusted Originators (ACH Only)
Certain ACH Originators are trusted by institutions and not deemed a significant risk. Examples would include the institution itself (for transfers and loan payments), the IRS and other major vendors. The system allows the institution to mark these ACH Originators as TRUSTED and therefore their items do not cause an exception for any account they may charge via an ACH debit.
ACH Watched Originators (ACH Only)
If the institution does not want to allow a specific ACH Originator to debit any amount to an account, the system can toggle on the WATCH feature when reviewing the first exception. This will automatically flag any debit transaction to the account from that Originator as an exception for review/reject handling.
ACH Blacklisted Originators (ACH Only)
For ACH Originators that are suspected of initiating fraudulent transactions, JMFA FraudMANAGER® provides a method to BLACKLIST the ACH Originator. This feature can be toggled on/off from an exception, but any BLACKLISTED Originator will have EVERY debit flagged as an exception to ANY account for ANY amount at the institution.
MICR Approved Recurring Amounts (MICR Only)
Exception items that are recurring payments/drafts can be marked as an APPROVED RECURRING AMOUNT. This feature will let these items automatically be approved in the future without reviews. It is important to only use this on items that are for unique amounts and recurring. Examples would include mortgage payments, insurance drafts and other similar payments.
Volume Anomaly (MICR & ACH)
This test runs an analysis of the account, comparing the recent period's activity against that of a prior period to determine if the number of debits has changed by a significant percentage. This would indicate that the account activity has changed from the past and may indicate potential fraudulent activity. The system allows the institution to set the period's number of days and the percentage variance by account type.
Value Anomaly (MICR & ACH)
This test runs an analysis of the account, comparing the recent period's activity against that of a prior period to determine if the total dollar amount of debits has changed by a significant percentage. This would indicate that the account activity has changed from the past and may indicate potential fraudulent activity. The system allows the institution to set the period's number of days and the percentage variance by account type.
PaperPIN Exceptions (MICR only)
If an account is marked for PaperPIN, then the system will allow the account to calculate the PaperPIN code that should appear on the check's memo line. All items over the account's floor limit will require review to confirm the code is present and correct on the check.
RestrictivePAY Exceptions (MICR & ACH)
If an account is marked for RestrictivePAY, then the system will allow the account to indicate check number ranges for approved items. All items presented for payment will be checked to make sure they are within the check number ranges or be flagged as an exception.
PositivePAY Exceptions (MICR & ACH)
If an account is marked for PositivePAY, then the system will allow the account to upload issue files or manually key issued items. All items presented for payment will be checked to make sure they are included in the Issue File or be flagged as an exception.
JMFA FraudMANAGER® Brochure