Independent Banker | What Every Community Bank Needs to Fight Fraud
By Katie Kuehner-Hebert
Fraud continues to complicate the lives of community bankers and their customers. While the industry would be a far better place without it, the reality is that community banks must build fraud awareness, knowledge and prevention skills in order to succeed. And that all starts with knowing what to look out for.
“Fraud mechanisms and scam typologies are constantly evolving, and community banks continue to be challenged by their stubborn persistence,” notes Scott Anchin, ICBA’s senior vice president of strategic initiatives and policy. “Fraud and scams don’t just affect the bottom line; they affect customer relationships and divert resources away from other important operational activities.”
Anchin says check fraud, payment card friendly fraud, romance baiting and business email compromise top the list of today’s fraud concerns.
Worst of the worst: check fraud
Following years of exponential growth, check fraud remains the most concerning issue for community banks in 2025, says Terri Luttrell, compliance and engagement director at financial institution software provider Abrigo in Austin, Texas. According to the 2024 Abrigo Fraud Survey, 61% of Americans still write checks. This represents a decline in overall check volume, but incidents of fraud and the resulting losses remain high across the U.S. Luttrell cites current FBI statistics: $18 billion in annual check fraud losses, 500 million fraudulent checks per year and more than a million fraudulent checks detected daily.
At $1.6 billion-asset Plumas Bank in Quincy, Calif., “one of the strongest and most effective” check and ACH fraud protection tools the bank offers its commercial customers is positive pay with payee match, says Sarena Barker, senior vice president and digital banking manager.
Positive pay automates transaction monitoring for possible check and ACH fraud, and payee match double-checks payee names on images and issued check files. “Our clients say it’s a real game-changer and it provides peace of mind,” Barker says.
Furthermore, Plumas Bank recommends that both its commercial and retail customers use the community bank’s secure online banking and bill pay services instead of writing and mailing checks because there are additional safeguards within those that can help deter fraud. Customers can review their transactions in real time, set up alerts and daily thresholds to easily monitor any unusual activity, and establish multifactor authentication (MFA) for an extra layer of validation.
Know your fraud types
Along with the types of fraud mentioned in this article, the FBI lists these types of fraud to watch out for:
- Business email compromise
- Advance fee schemes
- Nigerian letter (419 fraud)
- Ponzi schemes
- Pyramid schemes
- Synthetic identity fraud
- Romance scams
- Skimming
- Spoofing and phishing, including smishing (text) and vishing (voicemail)
- Grandparent scams
- Government impersonation scams
- Sweepstakes/charity/lottery scams
- Home repair scams
Combating consumer scams
When it comes to consumer fraud, it’s all about scams: scamming them out of their credentials or one-time tokens, or duping them into sending instant payments, says Rene Perez, national director of financial crimes sales and financial crimes consultant at tech solutions provider Jack Henry in Monett, Mo.
“Banks have really gotten to the point where they have a lot of resources and tools put into place to protect their four walls,” says Perez, “so for fraudsters, the path of least resistance is targeting, more and more, consumers themselves.”
He notes that one scam growing in popularity is when fraudsters place ads on Facebook Marketplace for goods, asking buyers to pay outside of the platform and use Venmo or PayPal instead. The goods don’t exist.
“If a buyer sends money through Facebook, Facebook then holds that money from the person selling the item until that item is confirmed and received. Facebook then releases the money,” Perez says. “Both Venmo or PayPal have opportunities to claw back money as well, but it’s a lot more hoopla. You’ve already lost the money, and you’re now trying to gain the money back.”
Another scam targeting wealthy consumers, Perez says, is “pig butchering,” where fraudsters dupe individuals into investing dollars or cryptocurrencies using fake apps or websites. After sending their money, the fakes are taken down and the victims lose their money.
“A lot of the fraudsters that are committing the pig butchering scams are actually human trafficking victims,” Perez notes, “and they’re trying to buy their freedom from the fraud organization.”
. . .
To see the full article, visit Independent Banker, “What Every Community Bank Needs to Fight Fraud.”
