New check fraud tactics, along with new technologies and software, have made fake checks cheaper and easier to produce than ever.
Despite a steady drop of checks in circulation, check fraud remains stubbornly pervasive. The expansion of deposit channels – including mobile and remote deposit capture – has made preventing fraud more difficult.
High Point, N.C.-based Advanced Fraud Solutions, which provides deposit fraud detection software released a new white paper, The Changing Landscape of Check Fraud, on the latest trends and risks related to check fraud. The paper details how the adoption of new deposit channels, to meet member expectations and have evolved check fraud tactics. It also explains why checks continue to present a risk to financial institutions, including credit unions and their members.
New Check Fraud Tactics, Old Technology
“Checks still remain the dominant business-to-payment used to fulfill financial obligations across the United States. As technological advances and digitization in payments processing evolves, so too does the landscape of check fraud,” the white paper maintained. “Fraudsters continue to take advantage of access to inexpensive technology, social engineering tactics, and remote business practices to engage in illegal and deceptive check fraud practices.”
The study made it clear significant investments in cybersecurity and fraud prevention measures by financial institutions aside, payments fraud in the United States is still rampant. Last year, 70% of U.S. organizations (according to the Association for Financial Professionals 2019 payments fraud and control survey) reported check fraud. What’s more, the check fraud tactics were responsible for more than $18 billion in losses. New check fraud tactics, bolstered by access to new technologies and software have made fake checks cheaper and easier to produce than ever.
“The realities of brick-and-mortar banking have shifted. Depositing a check no longer requires an in-person face-to-face transaction. Shared branching at credit unions and the growth of mobile remote deposit capture, ITMs, and kiosks have led to more check fraud attempts than ever before,” the white paper claimed.
Checks Still Most Vulnerable Payment Method
The white paper revealed check usage in steady decline in recent years. Nowadays, checks are employed in 42% of B2B transactions, an all-time low compared to 74% in 2007 and 81% in 2004 (AFP 2019 Payments Fraud and Control survey). Yet, even as Automated Clearing House, web, mobile, and card payments use increases, paper checks continue to lead B2B transactions around the world. Therefore, checks continue as a recurrent and rewarding target of payments fraud. The average phony check or money order scam costing FIs $1,500 per item.
In 2019, payments fraud hit large organizations harder. Businesses with revenue greater than $1 billion reported an increase of 7% incidents year to-year (87%), according to the paper. Though down slightly from 2018, checks (70%) are still the payment method most vulnerable to fraud.
Double Presentment and Other Remote Deposit Check Fraud Tactics
One popular tactic involves thieves making a remote deposit via mobile device and then walking into the credit union or bank to deposit the same check. Without effective frontline check fraud prevention solutions in place, tellers will cash the funds, since the check has not technically cleared. The teller line armed with effective frontline prevention measures of can stop “Double presentment” ploys like these, AFS said.
“Low-technology forms of fraud are easy to overlook, but just as easy to perpetrate,” Ted Kirk, vice president of strategic partnerships at AFS, said. “At Advanced Fraud Solutions, we believe in taking a proactive, omnichannel approach. Fraudsters have more access than ever to marketplaces, resources and information to pull off sophisticated check fraud schemes. Now is the time for FIs to step up their efforts and add an additional layer of security across their deposit channels to shut down fraud and prevent losses.”
AFS said TrueChecks evaluates deposits across these channels by scanning check data against the TrueChecks database with over 10 years of historical data. These contributions come from thousands of banks, credit unions, and processor sources. This database integrates with existing systems and offers real-time responses on duplicates (effective against double presentment ploys) counterfeits, non-sufficient funds, and closed accounts. This helps reduce manual workload, manager intervention and check fraud losses.
— via Credit Union Times