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Check It Out: How Can You Better Protect Against Check Fraud at Your Institution?

Three Emerging Check Fraud Trends to be Aware Of

When was the last time you wrote a check? We’ll wait…

While you may not have written a check in a while, businesses still rely on checks as one of their top forms of payment and are a lucrative source for check fraud. Those accounts tend to have more money and/or higher limits than personal accounts. There is also usually more than one signee assigned to those accounts, making them more susceptible to fraud. Additionally, the access to new technology to create realistic counterfeit checks continues to make check fraud one of the largest forms of fraud in the world. (Now would also be a good time to look for your check book. Fraudsters don't need to make a counterfeit version if they have the real thing.)

According to the ABA’s 2017 Deposit Account Fraud Survey Report, banks stopped $17 billion in fraudulent transactions in 2016, 35% of which were check fraud. (Financial institutions also stopped almost $6 billion of that $7 billion from getting paid out, so give yourselves a pat on the back!) The 2017 AFP Payments Fraud and Control Survey reported 75% of financial institutions experienced check fraud in 2016, up from previous years. Over 31% of those institutions said they experienced over 15 incidents of check fraud.

One would think as technology improves so would the safeguarding features around monetary transactions. Mobile depositing of checks, for example, has actually made check fraud easier. A growing fraud issue is duplicate deposits of those checks. Fraudsters cash the same check twice – once via mobile deposit, and once in the bank branch months later, making off with double the money if institutions aren’t vigilant. As mentioned before, these scammers are also using high-tech devices to their advantage, printing fraudulent checks from top-of-the-line printers making them look legit to the untrained eye.

Check fraud still appears in traditional forms, including basic counterfeit checks, forging checks, paperhanging (writing a check from a closed account) and check kiting (“floating” a check from one low- or no-balance account to another to cover payments). Yet, emerging check fraud trends are important for you and your staff to be aware of in order to protect both your financial institution and your customers.

Lottery/Sweepstake Winnings: Scammers send a letter saying you won a lottery or sweepstake with a check for a couple of thousand dollars. All you have to do is deposit the check into your account, keep a small part for yourself and wire the rest of the amount back. It’s a win-win, right? It would seem, but only until the check is marked as fraudulent and your account is overdrawn by a few thousand dollars.

How do you prevent this at your institution? If a customer comes in with a check like this, have your tellers/front of house start a conversation with him/her explaining the latest scams going around. They are especially susceptible to this type of scam if their account balance is normally well below the dollar amount on the check. Who doesn’t want to get rich quick? Also, pay attention to the physical check. Where is the origination address? Does this match the business on the front of the check? Are the routing numbers correct? Are there physical signs of alteration, including stains or discoloration? BAM+ fraud scenarios run over 30 scenarios to prevent lottery scams, including sudden check deposit activity, real-time deposited check fraud detection, and ACH credit amount spikes.

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Business Email Compromise: According to AFP’s survey, 34% of all BEC scams targeted check fraud. Criminals send a fake or phishing email to a member of the finance team at a corporation either pretending to be a high-level executive or presenting a fake invoice. Often times the scammers will spend a few days “grooming” this employee to persuade him/her the claim is real. Eventually, the employee sends back secure financial information, allowing the criminal to forge a business check or process a wire transfer.

How do you prevent this? IT departments are becoming increasingly vigilant against these types of scams, but that doesn’t mean they stop 100% of them. Pay attention to business checks over a certain threshold amount or when there is a spike in the number of checks issued over a certain period. BAM+ fraud scenarios automatically checks for both of these.

Check Overpayment Scams: A customer is selling his/her car online or in the local classifieds. They get a check in the mail from the buyer for $1,000 over the asking price. When he/she calls the buyer to alert them of the overpayment, they say it was an honest mistake and ask him/her to wire them back the extra $1,000. So your customer comes in with the check and starts a wire for the extra money. Then the check comes back as fraudulent, the scammer made a quick $1,000 and your customer depleted his/her account.

How do you prevent this? When a customer comes in to deposit a large check and make a wire payment, have your front of house strike up a conversation and see where the check came from. If it is over the CTR filing thresholds, you will have to file paperwork on it anyways, so the conversation is necessary. If it seems like this customer is a victim of an overpayment scam, suggest he/she return the check and ask for a new one with the correct amount.

These are just a few emerging fraud trends on a list that grows daily. As technology evolves so do the ways fraudsters conduct their illicit businesses and approach victims. Tellers can stop most check fraud at the teller line by spotting a counterfeit or fake check.

How do your tellers know what to look for when it comes to check fraud?

When accepting a physical check, take a close look at the check. Pay attention to the check numbers. Most scammers use low numbers on personal checks (101-400) and higher numbers on business checks (1001-1500). Verify the customer’s address, look for signs of discoloration or stains from erasures or attempts at altering printed info. Visit FakeChecks.org for a fun way to test your staff’s knowledge of counterfeit checks.

When you’re ready to stop check fraud at a higher level at your institution, contact us for information on our BAM+ Fraud Scenarios. Together with our leading BSA/AML software, fraud solutions work to look for patterns through transactions that raise fraud red flags, including check fraud. Our scenarios scan for everything from sudden check activity to duplicate serial numbers to check amount thresholds, offering all this in real time monitoring. Our multi-dimensional technology combines institution-level risk thresholds and behavioral logic that identifies individual and peer deviations with typology pattern recognition. Our enterprise fraud case management system allows you to track and record fraud cases for your entire institution, giving you an all-encompassing view of the fraud at your organization.

At the end of the day, trust your intuition. If something feels off, take a second to investigate it a little deeper. Ask another question; take a harder look at the check. You may just save a customer a very real headache… and thousands of dollars.

About Abrigo

Abrigo is a leading technology provider of compliance, credit risk, and lending solutions that community financial institutions use to manage risk and drive growth. Our software automates key processes — from anti-money laundering to fraud detection to lending solutions — empowering our customers by addressing their Enterprise Risk Management needs.

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