Surprising stats that prove check fraud should not be ignored

Cash may be king, but for many purchases, cash is just not reasonable or possible. And while payment cards and ACH are popular alternatives, the assumption that paper checks are dead is a risky one to make. The overall usage of checks during the past decade have declined, but not at an accelerating rate. (1) In fact, in the US, paper checks are not going away anytime soon, especially in business transactions, where 51 percent of B2B payments are still made by check.(2) Despite the continual decline, checks today are the payment method most often targeted by fraud. This is why your credit union cannot ignore making improvements to the security of your paper check handling and processing.

71 percent of companies experience check fraud

According to the 2016 AFP Payments Fraud and Control Survey, 71 percent of companies experienced actual or attempted check fraud in 2015. Since check usage itself is down, this number also represents a decline in check fraud, down from 77 percent in 2014. Forty-four percent of organizations that experienced check fraud in 2015 suffered between one and five incidents; whereas 22 percent were subject to between six and ten incidents.

If you belong to the camp that checks are disappearing and fraud isn’t a concern, keep in mind that check fraud has not declined at the same rate as check use. The same study found that while check fraud may be slightly down, the fraudsters are getting better at what they do. Since checks have been around for so long, these defrauders are familiar with checks and are able to commit check fraud with relative ease with the help of sophisticated equipment. Checks are physical items that can be altered fairly easily and modern technological equipment aids counterfeiting. For this reason, check fraud accounted for the largest dollar amount of loss of any type of fraud in 2015.

Putting Protective Measures in Place

There are effective protective measures credit unions can offer to assist in preventing fraud at the frontline or from within member accounts. The previously mentioned AFP study uncovered that a majority of companies were targets for check fraud one to five times in 2015, and twenty-one percent were attacked more than 21 times. This suggests that fraudsters “cast a wide net” in hopes to find vulnerabilities, and once found, will repeatedly attack the same credit union, business or individual.

Member education and employee training is a great first step to preventing fraud. Especially since credit union members may believe that check fraud is less likely to occur than mobile payments fraud. However, forty-two percent of AFP study respondents reported an increase in check fraud attempts in 2015.

Integrating technologies that process paper checks is another step to preventing check fraud. This would mean, for instance, combining systems that aggregate check deposits – the teller line and remote deposit capture channels for instance. Having integrated systems will automatically detect duplicates (dedupe) in real-time and remove them from the processing system. This would be in addition to a “For Mobile Deposit Only” and “VOID” programs, that are already most likely in place at your credit union.

Combining technologies might be the most effective way to prevent check fraud. Most credit unions employ some type of check-21 processing system, whether it be teller or branch capture. Adding a fraud detection service to the check-21 process will help validate accounts and/or funds availability. Integrated fraud detection combined with teller capture check-21 can increase the speed of transactions and protect credit unions from the trend of fraud in the processing of checks, even as checks begin to disappear.


Preston Packer

Preston Packer

Preston Packer is the Director of Sales & Marketing for FLEX. Preston has been with FLEX since 2000 and has worked in various sales management roles over that time. Preston’... Web: Details