Checkmate on Check Fraud: Why It’s Rising in 2024 and Why You Should Care?

You might think checks might have disappeared in today’s fast-moving, tap-and-go world, but here’s a plot twist: they not only exist but have become the center of financial crimes.

Yeah, you read it right! Checks are a hot target for fraudsters in 2024.

Seems odd, right?

Well, you might wonder, in this age where a single tap on a smartphone can transfer thousands of dollars, why are checks with physical limitations and slower processing still used?

Moreover, why have they become a growing concern for financial institutions in the fight against financial crimes?

Well, it’s because of the emerging innovative fraud techniques, targeting checks: Check Fraud.

As per FinCEN, in 2022 banks issued around 6,80,000 reports of check fraud, nearly double of what was reported in 2021.

Also, fraud, including check fraud, is the largest source of illicit proceeds in the US and represents one of the most significant money laundering threats to the US, as per the FinCEN alert.

Why is check fraud on the rise?

You might be thinking, with the rise in preference for digital transactions, why check fraud is still a concern. Well, several factors contribute to this.

Firstly, the surge in mail theft-related check fraud is increasing fraud, as per FinCEN alert.

Secondly, the physical nature of checks and the wealth of personal information make them more attractive to fraudsters.

Additionally, the lag in the processing time gives fraudsters an opportunity to exploit. This lag, when combined with sophisticated techniques like check washing, leads to a rise in check fraud activities.

How does check fraud impact financial institutions?

Here’s how check fraud affects financial institutions:

  • Financial losses: Financial losses are the most immediate impact, with banks often absorbing the cost of fraudulent transactions. Moreover, there can be hefty fines at times.
  • Reputational damage: Check fraud can affect customer trust and relationships. This leads to low customer retention and difficulty in attracting new customers.
  • Affects overall efficiency: Investigating and resolving check fraud cases also diverts resources from other areas of operation, affecting overall efficiency and service delivery.
How can banks prevent check fraud?

In response to the evolving challenges of check fraud, banks need to double down on their commitment to safeguard our clients’ finances. Here are some key ways to prevent check fraud:

  • Strengthen verification processes: Apply rigorous verification for checks, especially for large amounts or unusual transactions.
  • Leverage advanced detection techniques: Using AI and ML, banks can analyze patterns and flag-check fraud transactions.
  • Educate customers: Offer guidance to customers on secure check handling and encourage immediate reporting of lost or stolen checks.
  • Strengthen internal controls: Regularly review and improve internal protocols to detect and prevent fraud.
  • Promote secure payment alternatives: Encourage customers to use electronic payments or P2P transfers as safer options.
  • Implement fraud detection software: Implement fraud detection software like Velocity to make sure to detect and prevent fraudulent activities.
Combat check fraud with Velocity

With these evolving check frauds, adopting a proactive, multi-layered approach is crucial in safeguarding the financial health of individuals and institutions alike.

By using advanced technologies, implementing rigorous verification processes, and fostering a culture of security awareness, financial institutions can build a formidable defense against check fraud.

Try out Velocity fraud detection software to detect and prevent fraudulent activities and safeguard the reputation of the financial institution.

Vineet Mishra
Vineet Mishra

Specializes in leading implementation of Financial Crime prevention software suites across the USA, Canada, and Australia’s financial institutions.

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Vineet Mishra

Specializes in leading implementation of Financial Crime prevention software suites across the USA, Canada, and Australia’s financial institutions.

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