New Executive Order Aims To Tackle Federal Payments Fraud In The US

March 27, 2025
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President Donald Trump has signed a sweeping executive order aimed at combating federal payments fraud and modernising the way the US government processes financial transactions.

President Donald Trump has signed a sweeping executive order aimed at combating federal payments fraud and modernising the way the US government processes financial transactions. 

The executive order strengthens oversight of the trillions of dollars that flow through the US Treasury each year, and is designed to increase transparency, reduce inefficiencies and strengthen safeguards against improper payments.

The Government Accountability Office (GAO) estimates that between $233bn and $521bn is lost annually due to fraud, which the executive order points out is largely because of outdated systems and fragmented oversight. 

The new directive mandates pre-certification verification for all federal payments, requiring agencies to confirm fund availability, verify payee identity and adhere to standardised financial reporting. 

Overall, this would be the beginning of confirmation of payee in the US — albeit on a limited scale, considering it is specific to government payments. 

Agencies in the US are also set to be required to share relevant financial data with the Treasury to improve fraud detection capabilities, subject to applicable privacy laws. 

An additional part of the modernisation effort is that the order mandates the full transition to electronic payments by September 30, 2025. 

Federal agencies will phase out paper cheques in favour of direct deposit, digital wallets, debit and credit card payments, and real-time transfers. 

This shift will apply to all government disbursements, including Social Security benefits, tax refunds, vendor payments and federal loans.

The move is expected to curb mail theft and cheque fraud, which has surged in recent years. 

Banks reported 680,000 cases of cheque fraud in 2022, nearly twice as many as the previous year, and Treasury data shows that paper cheques are 16 times more likely to be lost, stolen or altered compared to electronic transfers.

To ease the transition, a public awareness campaign will be launched, and exemptions will be enabled for claimants without access to banking services, as well as for emergency payments and certain law enforcement activities.

More burden, or more opportunity?

Financial institutions in the payments space will face some disruption from this development, given the operational changes it will bring. 

Financial institutions (FIs) handling government transactions will need to upgrade their systems to process many more digital payments, and banks that are involved in cheque clearing and lockbox services will face disruption as these are phased out. 

Those managing federal payments must also comply with new Treasury standards for verification and reporting, implementing name-check procedures resembling those in other jurisdictions such as the UK, Australia, India and, soon, the EU. 

But although FIs will face compliance and reporting challenges, they also have a chance to expand their role in the digital payments ecosystem. 

Those that can offer efficient, secure payment solutions at scale will be well-positioned to capitalise on this modernisation effort.

For example, as government payments in the US switch online, more individuals and businesses will rely on direct deposit, digital wallets and instant transfers. 

Payments providers that can offer seamless electronic funds transfer solutions stand to benefit from this shift.

The government will also require financial technology partners to manage large-scale payment processing, fraud prevention and compliance monitoring. 

Elsewhere, governments have utilised private players. For example, Ecospend provides open banking services to HM Revenue & Customs, the UK tax office. 

Banks and payment companies will be able to compete for contracts to handle benefits, vendor payments and tax transactions.

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