ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Compliance and Risk

Combating check fraud: Still a major challenge in the digital age

July 21, 2022
Reading Time: 4 mins read
Combating check fraud: Still a major challenge in the digital age

By Todd Robertson

Checks remained the payment method most impacted by fraud activity (66 percent), reports from the 2021 Association for Financial Professionals Payments Fraud and Control Survey. Financial institutions encounter deposit fraud in many ways, including counterfeits, forgeries, alterations, serial numbers, stop payments and check kiting.

rightwards arrow
View more
risk and compliance articles

While many organizations are rightly focused on combating digital fraud, fraudsters are also still dialed in to check fraud. Improving efforts to combat check fraud should start with financial institutions utilizing extensive mathematical and machine learning methods to analyze transactional data, check stock and signatures to identify potential suspicious items and corresponding risk exposure. Effective check fraud prevention will help FIs evade exploiters and their newest innovative fraud schemes.

Staying ahead of fraudsters

The 2019 Deposit Account Fraud Survey report by the American Bankers Association showed that check fraud represented 60 percent of attempted theft aimed at deposit accounts. During the pandemic, mobile banking increased by 200 percent in new registration, leaving banks vulnerable to risk. This innovation has given fraudsters just as much convenience as it has customers. Perpetrators no longer have to show their faces at physical branches or ATMs to deposit fake checks.

Another recent check fraud scheme financial institutions have been combatting is fraudsters leveraging unwitting accomplices via Instagram. These individuals are contacting Instagram users and paying them to use their accounts to commit the scam. Then, the fraudster utilizes these accounts to post photos of bank account statements with large balances and claims how easy it was to make money through a “currency exchange.” If the target agrees, the fraudster sends the target a check to deposit in their bank account. Once the check is deposited, the fraudster tells the target to withdraw money from the deposit account and send it via an online money transfer system or through cash. After a couple of days, the bank notifies the victim that the check was fraudulent, and the victim could be responsible for the check’s amount.

Fraudsters become more innovative every year, targeting vulnerable victims to execute their nefarious plans. Although check use is not as common in the digital age, fraudsters utilize checks as a convenient medium to exploit banks and their customers. Fortunately for financial institutions, a few key methods can be utilized to combat check fraud in 2022.

A proven trio to detect and prevent check fraud

Transaction analysis is one of three key tools financial institutions can use to combat check fraud. Transaction analysis is the process of examining bank transactions to look for unusual and suspicious activity or other issues. This key component scrutinizes debits and credits contained in deposits and withdrawals to identify suspicious items such as out-of-range check numbers and check amounts and duplicate check numbers. It also applies tests at the account and entity level, measuring such things as account velocity, account volume, and deposits or withdrawals of unusual amounts.

Check stock validation is the second tool used to combat check schemes. Check stock validation consists of analyzing presented check images against historical, referenced check images in order to authenticate the check stock. The solution helps institutions more effectively identify counterfeit in-clearing and over-the-counter checks with greater speed, accuracy and reliability than visual inspections. Check stock verification leverages technology to spot aberrations that cannot be detected by the human eye. It also reduces the number of manual verifications and decreases false positives through digital check image analysis. This process improves the check fraud detection process and alleviates the burden on your in-house anti-fraud team.

Signature verification is the final component used to combat check fraud. This solution uses machine learning algorithms and sophisticated decision trees to provide a detailed analysis of check signatures. This results in efficient evaluation of suspect in-clearing and over-the-counter checks and increased confidence levels for acceptance and return decisions.

Signature verification compares digitized signatures to referenced images, manages multiple signatories on the same account and monitors items requiring dual signatures to validate check signatures on personal and business accounts. Focusing on dynamic aspects of the signing action, including signature fragments, handwriting trajectories, and geometric analytics helps produce confidence scoring based on these aspects when comparing newly presented check signatures with previously saved images to determine matching and nonmatching elements.

Check fraud doesn’t seem to be slowing down anytime soon. But there are tools banks can use to mitigate risk and reduce fraud loss. Used simultaneously, transaction analysis, check stock validation, and signature verification empower your financial institution to prevent fraudulent check deposits. Financial institutions that focus on combatting check fraud will earn the trust of their customers and provide an overall safer banking experience.

As SVP for business development at ARGO, Todd Robertson works with more than 425 banks to transform customer experiences and improve operational efficiency.

ADVERTISEMENT
Tags: Checking accountsFraudMachine learning
ShareTweetPin

Related Posts

Sanctions Compliance Pitfalls for Banks

How one bank’s ‘stop and think’ message slashed customer fraud losses

Compliance and Risk
May 20, 2025

What constitutes effective fraud prevention strategy? One path to success is a larger, strategic program.

Senate Democrats seek proposals for regulatory changes following recent bank closures

Senate votes to advance stablecoin bill

Newsbytes
May 19, 2025

A bill to create a regulatory framework for payment stablecoins cleared a key procedural hurdle after several Democrats joined Republicans in voting to advance the legislation.

ABA, BPI seek transparency around Fed stress tests

ABA, associations urge flexibility in large bank stress test changes

Compliance and Risk
May 19, 2025

ABA joined three financial sector associations in urging the Federal Reserve for a more flexible compliance deadline for proposed changes in the stress capital buffer requirement for large banks.

CFPB releases mortgage servicing proposal, overhauls loss mitigation framework

CFPB ends pandemic-related mortgage foreclosure relief

Compliance and Risk
May 16, 2025

The CFPB issued an interim final rule ending protections for mortgagors experiencing hardships due to the COVID-19 pandemic.

CFPB warns against certain terms in financial service contracts

CFPB withdraws proposed ban on certain contract language for financial products

Compliance and Risk
May 15, 2025

The CFPB has withdrawn a proposed rule to prohibit contractual provisions in agreements for consumer financial products or services that waive “substantive” consumer legal rights and protections.

CFPB launches ‘tip line’ to report on bureau employees

CFPB withdraws proposals on data brokers, digital payment mechanisms

Newsbytes
May 15, 2025

The CFPB has withdrawn two proposed rules concerning data brokers and digital payment mechanisms. Both were proposed after the 2024 elections.

NEWSBYTES

Senate votes to advance stablecoin bill

May 19, 2025

ABA, associations urge flexibility in large bank stress test changes

May 19, 2025

FS-ISAC releases annual report on financial sector cyber threats

May 19, 2025

SPONSORED CONTENT

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025
Six Payments Trends Driving the Future of Transactions

Six Payments Trends Driving the Future of Transactions

March 15, 2025
AI for Banks: A Starter Guide for Community and Regional Institutions

AI for Banks: A Starter Guide for Community and Regional Institutions

March 1, 2025

PODCASTS

Podcast: Accelerating banking for quick-service restaurants

May 8, 2025

How a Georgia community bank supports government-guaranteed lending nationwide

May 1, 2025

Podcast: Quantum computing’s shakeup in payments, cybersecurity

April 24, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.