Fraud Detection Process for Direct Deposit Payments

The Comptroller’s office contracts with an originating depository financial institution (ODFI) to process the state’s direct deposit payments via the automated clearing house (ACH). The Comptroller’s ODFI has implemented an automated fraud detection process using a proprietary algorithm that may flag and hold payments suspected of fraud.

ACH payments transmitted by the Comptroller’s office on behalf of state agencies may trigger a warning message by the ODFI’s fraud detection algorithm. Flagged payments will be held pending confirmation up to 24 hours after the settlement date. The ODFI will return payments that are not confirmed.

The following steps have been implemented to ensure timely arrival of your agencies’ ACH payments to your payees’ accounts:

1. The ODFI holds the ACH payment and sends an email to Fiscal Management requesting confirmation of the payment and payment instructions. Email notifications may be sent on any banking day, including state holidays that are not banking holidays.
2. Fiscal Management contacts the appropriate direct deposit coordinator at the state agency that issued the payment.
3. The state agency provides Fiscal Management with an email response confirming the intended payment and the legitimacy of the direct deposit instructions, which may require the agency to contact the payee.

   Note: Fiscal Management recommends that agencies confirm direct deposit information directly with the payee or a known contact at the vendor, using your agency’s established records for contact information.

4. Fiscal Management provides the ODFI with the requested payment confirmation and requests the release of the payment.
5. On receipt of the payment confirmation from Fiscal Management, the ODFI releases the payment through the ACH system and the payment posts to the intended account.

It is critical that agencies respond promptly to Fiscal Management’s request for payment and direct deposit confirmation to ensure payees’ ACH payments post to their accounts in a timely manner. Any delays in responding to the ODFI’s request for confirmation may result in the return of the ACH payment by the ODFI, which would require the agency to reissue the payment.

If an ACH payment is returned to an agency for reissue due to the fraud detection process, the agency must submit the USAS transaction with RD (returned direct deposit) in the IC (interest code) field to avoid late payment interest. See Interest Control Reason Codes (ICRC) in USAS Reference (FPP Q.012).

For reissue transactions:

• If the original payment included late payment interest, the reissue transaction must include the original amount of interest paid using comptroller object 7806 (prompt payment interest). Include RD in the IC field.
• If the reissue transaction requires a due date, use:
  • The original payment distribution date.
    – or –
  • The original payment due date.

Be sure to coordinate backups if the primary direct deposit contacts are not available, and ensure the Comptroller’s office has your most up-to-date agency contact information. See Fiscal Management Agency Contacts Update Process (FPP C.021).

Ensure your agency contacts are updated by submitting the online Contact List Update Form and contact Payment Services with any questions.