Check fraud in the U.S. has surged post-COVID-19, perplexing financial crime prevention experts. Once a nearly extinct crime, it has rebounded due to large-scale mail theft by organized crime and advanced counterfeiting techniques, making forgery detection challenging. The number of suspicious activity reports (SARs) related to check fraud doubled from 2021 to 2022, with check fraud now accounting for 60%-70% of total fraud losses at many mid-sized banks.
Check fraud liability varies by type: altered checks place liability on the deposit bank, while counterfeit checks fall on the originating bank. Criminals often intercept checks through mail theft, reprint them with new beneficiaries, and deposit them, complicating detection due to high-quality counterfeits. Modern detection systems struggle, with U.S. banks reporting 98%-99.5% false positive rates, leading to inefficient investigations.
To combat this, banks must enhance detection systems, prioritize investigations of high-value checks, and adopt best practices like monitoring the dark web, automating customer outreach, and using mule repositories. Effective operations, automation, and better customer outreach are essential to mitigate the growing problem of check fraud.
For more insights, read the full article by Uri Rivner, Refine Intelligence’s CEO, on Thomson Reuters (subscription required).
