2024 Public Sector Perspectives

How account verification works Account verification confirms that a citizen or company’s bank account is open and valid and that they are the owner or beneficiary of the bank account. Typically, it is not part of a regular payment flow. Instead, it is a pre- validation tool. Governments and public sector entities may choose to do a one-time check of their existing payee repository to validate status, name, and owner. These details can be validated on a single- entry basis or – as is more likely for government or the public sector given large payment volumes – either as a batch file or via application programming interface (API). Validation takes place in real time. After checking the existing database, any new payees, or citizens and vendors that change their account details, can be quickly and easily validated as required. Checking the details of existing payees that change their account details is especially important. ‘Change of banking details’ scams are extremely common, with fraudsters intervening in the communications between suppliers or citizens and the government – often via phishing attacks – to substitute bank details and direct all future payments to the new alternative bank account. Account verification also supports the NACHA Web Debit Account Validation Rule, which became effective in March 2021. The Rule requires all entities (including those in the public sector) that initiate consumer ACH debits via the internet or a mobile device to validate the consumer’s account prior to the first debit transaction. International account verification The National Shared Database is a US-only product and can only be accessed by entities within the US. However, pre-validation and other verification services are offered across various markets from a number of Fintechs and other data aggregators such as SWIFT. Open Banking, where banks share customers’ transaction and other account details (with their permission) with other third parties is long established in the EU and the UK (and is gaining momentum in Latin America): it can also potentially be used for account verification. For governments and public sector entities that make international payments – perhaps to retired citizens overseas or foreign suppliers – having a consistent way to access account verification services in other countries could be valuable. Citi is working to integrate multiple offerings into its Citi Verify solution to give governments a comprehensive way to validate account details globally. Account verification confirms that a citizen or company’s bank account is open and valid and that they are the owner or beneficiary of the bank account . Reinforcing trust with citizens and companies Account verification is a relatively new tool for both the public and the private sector. However, adoption should be a priority for any public sector entity that makes payments to citizens or companies, given that account verification tools can help to reduce the risk of improper payments, enhance security, and drive operational efficiency. Account verification also offers governments and public sector entities an opportunity to act as a model to the private sector. While there is a cost associated with account verification, the saving realized by helping to reduce potential fraud can be greater. In addition, account verification can strengthen the relationship between payors and payees by helping to ensure that anticipated payments arrive to the intended party by limiting the chance for a misrouted or delayed payment. Implementing account verification can be straightforward with some banks, such as Citi, integrating the solution into existing banking tools. For companies being onboarded as suppliers to the public sector, account verification can be integrated into a broader onboarding process. While there is a cost associated with account verification, the saving realized by helping to reduce potential fraud can be greater. In addition, account verification can strengthen the relationship between payors and payees by helping to ensure that anticipated payments arrive to the intended party by limiting the chance for a misrouted or delayed payment. Citi Perspectives for the Public Sector 67 66 Account Verification: AMust Have for the Public Sector