“You Still Write Checks?” Check Fraud Remains an Expensive Headache for Banks and Credit Unions

Why Has Check Fraud Worsened?

  1. Mobile Deposits: The introduction of mobile deposits has been a notable breakthrough where customers no longer need to physically visit their branches and credit unions to deposit their checks. However, this convenience relies heavily on those customers securely destroying deposited checks, which is what leaves checks vulnerable to theft and fraud. For example, how often do customers write the word “deposited” on their check after a mobile deposit, how often are deposited checks left in office drawers or on desktops in to-do piles that don’t make it to garbage cans, and how often are checks torn up or shredded after being deposited?
  2. Digital Check Imaging: Digital imaging allows customers ease of visibility to check details through online banking portals. However, when fraudsters gain access to customer online accounts through weak passwords and other cyber techniques, these fraudsters exploit the images replicating crucial details like signatures and account numbers to facilitate check fraud.  Contrary to popular belief, fraudsters no longer need high-quality check images to be successful either. Remember the movie “Catch Me If You Can” from 2002 directed by Steven Spielberg and starring Leonardo DiCaprio and Tom Hanks? DiCaprio plays Frank Abagnale Jr., who claimed to have successfully performed numerous check fraud schemes working tirelessly to replicate watermarks, check images, and microscopic details. Today, fraudsters are simply copying essential details such as account numbers and signatures to produce convincing duplicates that pass mobile deposit screening. At AArete, we’ve seen basic white printer paper cut into the size of a check with some account details added, a seemingly minimal effort to deceive banks.

How Can Banks and Credit Unions Improve Education and Communication?

  • Review accounts where customers are frequently writing checks and directly encourage those customers to switch to new and secure digital payment methods such as mobile bill pay (e.g., “Did you know that you no longer need to write that check?”).
  • When customers go to purchase checks (yes, banks and credit unions are still making it easy for customers to purchase more checks), provide prompts and notifications that purchasing more checks should not be necessary if customers switched to new and secure digital payment methods such as mobile bill pay (e.g., “Did you know that you no longer need this many checks?”).
  • Advise payees on the safe destruction of physical checks post deposit. This should occur not only right after a check has been deposited but also a day or two after the deposit takes place (e.g., “Did you remember to destroy that check?”).
  • Educate bank employees more widely on check fraud schemes and promote better dialogues between employees and their customers (e.g., a branch employee should never respond by asking “You still write checks?”).
  • Continue to educate customers on maintaining strong passwords and safeguarding digital accounts (e.g., “Did you know that fraudsters can gain access to your checks if your passwords are weak?”).

How Can Banks and Credit Unions Use Technology to Fight Check Fraud?

  • Unfreezing accounts too soon Frozen accounts being reopened only to be subject to further fraudulent activity. Once a customer’s account information has been compromised, it has likely been sold to other scammers who are going to also try to withdraw funds. At AArete, we’ve seen check fraud departments allow customers to unfreeze accounts only to experience more fraudulent activity, resulting in further investigations and costs.
  • Keeping an account frozen for too long Frozen accounts remain idle, prompting customers to switch to new checking accounts, or even worse to a new bank altogether. For the latter, it is the fraud department and the customer services team’s shared goal to retain the customer through this fraud incident by giving them confidence that it will not occur again. However, it is also important to get the customer’s accounts cleaned up versus having the customer call the call center months later, re-explain the issues that occurred, and get the accounts closed, which is time-consuming and adds further costs long after the incident was resolved.
  • Lacking clear and timely customer communication and education Following a fraud resolution is a great time to educate the customer on check writing. However, our experience with banks has identified that any form of education post-incident is typically a templated email with a few high-level tips that often goes directly into a customer’s trash bin within their inbox. Communications should be far more personalized with steps to improve security and assurances to ease any additional worries.

In Conclusion – Strengthening Check Fraud Prevention

Christopher McGee

Managing Director