CHECK VOLUMES ARE DOWN, BUT CHECK FRAUD IS UP What’s It Costing Your Bank? By Wendi Klein Vice President, Marketing & Communications Alogent, ICBC Associate Member Thompson Reuters reports that U.S.- based financial institutions have seen “soaring volumes of suspicious financial activity” over the past three years. Their “Suspicious Activity Reports 2023” sites market disruptions due to COVID-19, technological shifts and growing vulnerable populations as key drivers for the spike. And, of all suspicious activity reports (SARs), check fraud was ranked the second largest SAR category last year, nearly doubling its 2021 figure. With recent emphasis on cyber security and digital payments, criminals are now exploiting gaps within deposit channels, as well as the postal system — reviving an old scheme called “mail fishing” or “mail theft.” This check fraud scheme involves stealing personal, business and other types of paper checks from mail carriers. With increased attempts during the pandemic when criminals targeted government relief checks, mail fishing has continued with such momentum that financial institutions have since warned account holders to avoid mailing checks altogether, or to use secure methods of sending/receiving. No financial institution — large or small — is protected from transaction or check fraud. In fact, there are as many as 1,875 fraud attempts a month in the U.S. alone. Although activity continues to rise, advanced technology has helped to block a significant number of attempts — however, just one successful attack by a fraudster can cost a bank or credit union thousands, if not millions, of dollars in losses and recovery — not to mention its reputation and potential account holder attrition. With check volumes trending down and fraudulent attempts trending up, is the deposit channel still an area of opportunity for your institution’s future? Over the last several years, account holders have traded checks for digital payments and branch visits for remote channels. However, for those still electing to write checks, their value has increased, and they prefer to visit the branch to make a deposit. On the commercial side, businesses — both large and small — have moved away from checks for transactions like payroll, yet opt to use them for invoices. Checks, as compared to credit cards and other digital payments, remain the only mechanism where the payee’s name and address are both available and volunteered, providing better control over liquidity and serving as a written record of the transaction or remittance. 16 | INDEPENDENT REPORT
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