by Sandeep Dhameja, Katy Jacob, and Richard D. Porter – Federal Reserve Bank of Chicago
At present, it is difficult to identify clear-cut guidance for preventing and mitigating fraud in retail payments in the United States. Part of the difficulty stems from the fact that the U.S. retail payment system has a decentralized governance structure. The Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau (CFPB) play an important role in developing and implementing guidance to curb retail payment fraud in the nation. However, in very large part, fraud prevention and mitigation are the primary responsibilities of the numerous entities running the various electronic and paper-based payment schemes across the country.
These schemes include those for payments made via the automated clearinghouse (ACH) system, payment cards (credit, debit, and prepaid cards), and imaged and paper checks. Federal, state, and local law enforcement agencies investigate instances of fraud, identity theft, and data breaches related to retail pay-ments, but not pursuant to any established overarch-ing policies or goals set by a central authority for all retail payments. Payment transactions, whether con-ducted domestically or abroad, are at risk for fraud orchestrated from anywhere in the world and, therefore, might rightfully fall under the jurisdiction of foreign authorities. Hence, international, federal, and state or local agencies may be responsible for the regulation, supervision, and investigation of retail payments, as well as the enforcement of the laws and rules pertain-ing to retail payment fraud.
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Clarifying liability for twenty-first-century payment fraud
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