The Checking Fraud Paradox: Checks may be going away, but check fraud isn’t

Wes Wilhelm, Lead Fraud Subject Matter Expert, Risk & Fraud Management

For those of you reading this that may be thinking that fraudulent check writing is old news, well perhaps it is. Some would even label this scenario, “SSDD” (Same Scenario Different Decade). And they would be right to do so. But despite the waning use of paper checks, which have been allegedly “dying” for years, they are not entirely dead yet. In reality, it is the “legitimate” use of checks that is dying – but fraudulent check writing schemes are still alive and well.

Ironically, the amount of check fraud hasn’t changed much despite the decrease in usage. In fact, according to the Association for Financial Professional’s 2014 Payment Fraud & Control Survey, 82% of survey respondents reported that checks were a primary target for fraud, despite declining use of checks. In addition, a longitudinal analysis of ABA Fraud Survey and Report data shows deposit account fraud losses averaged 741 million annually over the last 10 years and financial institution prevention rates have remained quite stable.

Which begs the question: why are we feeling déjà vu all over again? Why are today’s “sophisticated” fraudsters still bothering with checks? Why wouldn’t fraudsters just focus on upping their game to attack burgeoning mobile apps, and remote deposit capture, where fraud is currently disproportionately low and usage increasing?

The simple answer is: it’s so easy to perpetrate check fraud. Check fraud is a well-established, low overhead group of schemes that don’t need the same training or effort needed for more complex fraud schemes. A simple purchase from any one of the “top ten” check printing software tools, when used with a high-quality laser printer and paper from an online office supply store, in the hands of any self-respecting fraudster can produce high-quality checks that easily pass for the real thing. Remember, fraudsters aren’t looking for research credit, industry acclaim, or venture funding – they simply want to get the most money for the least amount of time and effort. This they do, without using sophisticated highly technical methods.

Case in point: the recent 2013 ABA Deposit Account Fraud Survey Report showed that 24% of check fraud losses were a result of counterfeit checks.

While financial institutions are increasing funds availability and introducing more customer-friendly, yet fraud-susceptible technologies like mobile remote deposit capture, fraudsters are realizing that check fraud is still a viable and lucrative venture. These new delivery methods are being built upon aging legacy risk management technologies spanning diverse point solutions. This creates an opportunity for fraudsters to migrate to the newer channels and utilize the same old methods of exploiting clearing times, funds availability and “Day 2” monitoring.

The best defense against this low-tech threat is to adopt layered defenses to assess underlying risk and using a wide net of data to drive the risk assessments. The current banking environment demands integrating multi-channel activity and multiple risk assessments into the financial institution’s overall fraud management strategy, instead of keeping them relegated to disparate legacy systems. By implementing these strategies, financial institutions can improve customer satisfaction, bolster fraud defenses, reduce losses, and importantly be ready to respond when fraud shifts again. In short, it is time to integrate all of your disparate point solutions preventing deposit account fraud under one roof and on one well-defined and integrated technology platform. Either that – or it could be déjà vu all over again.

Addressing Fraud Risk from COVID-19 Relief Efforts

May 7th, 2020
Rob Tharle, Fraud & Authentication Subject Matter Expert, NICE Actimize EMEA

A Changing Fraud Landscape: Navigating the Risks Amid COVID-19

April 17th, 2020
Rob Tharle, Fraud & Authentication Subject Matter Expert, NICE Actimize EMEA

UK Fraud Losses – What happened in 2019 and where are we headed now?

April 17th, 2020
Rob Tharle, Fraud & Authentication Subject Matter Expert, NICE Actimize EMEA
Speak to an Expert


We use cookies to ensure that we give you the best experience on this website. If you continue without changing your settings, we’ll assume that you are happy to receive all on the NICE website. However, if you would like, you can change your cookie settings at any time. To find out more about how we use this information, see ourPrivacy Policy.