​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Check Fraud Detection

Check fraud is a major issue that has caused significant losses for both individuals and businesses alike. Check fraud occurs when checks are fraudulently altered, forged, or counterfeited. Bank Secrecy Act reporting for check fraud has increased significantly in the last three years. In 2021, financial institutions filed over 350,000 Suspicious Activity Reports (SARs) to FinCEN to report potential check fraud, a 23 percent increase over the number of check fraud-related SARs filed in 2020. This upward trend continued into 2022, when the number of SARs related to check fraud reached over 680,000, nearly double from the previous year’s amount of filings.¹

​Check Fraud is Persistent

With check fraud making a comeback with a vengeance, many financial institutions (FIs) are facing growing check fraud losses. Although the number of checks written has dropped precipitously over the last decade, checks remain a favored payment method for businesses—roughly half of all B2B payments in the U.S. are made by traditional checks. FIs are seeing an uptick in fraud in commercial checks. Fraudsters skills have also evolved to alter, wash, and counterfeit checks, and the fraudsters are monetizing efforts in multiple ways to cash in. In some cases, checks are being sold in massive quantities in the dark net, and other fraudsters the solicit runners to cash-out the ill-gained checks.

To address this issue, NICE Actimize gives you the ability to accurately detect and prevent first-party check fraud, make real-time decisions, and offer immediate funds availability for legitimate transactions.

Our fraud solution provides:

• A holistic, cross-channel view of the customer for a clearer picture of deposit risk
• Improved operational efficiency, so you can focus your attention on truly suspicious activities
• Faster customer access to funds, increasing satisfaction
• Machine learning and predictive variables to detect multiple types of check fraud, including kiting, duplication, money mules and counterfeit 

​The Different Types of Check Frauds

There are traditional types of counterfeits, forged and altered, along with conversion, that are currently being used. Other scams include uncleareds fraud, also known as kiting.

• Counterfeits are where the whole check is fake. They are drawn against a business account and funds are removed before a fraud is noticed. A recent example where the counterfeit checks were cashed shows how lucrative this can be.
• Altered and forged checks use a real check written by the genuine customer, but that check either has the amount or payee altered or the signature of the real customer is forged. The fraudster completes other elements, too. This check fraud commonly involves checks and checkbooks stolen from the post or from a family member.
• Check kiting is where fraudsters abuse mismatches in the float/clearing cycle to withdraw funds from the beneficiary account before the check bounces on the paying account. Such frauds can be a one-off attempt or a cycle of increasing amounts between two or more accounts. This can also involve abuse of remote deposit capture to pay the same check multiple times. Check kiting is a form of first-party fraud.
• Conversion is where a valid check is paid into the account of someone else rather than the intended recipient. Accounts may be set up using similar names or paid at another bank’s counter to credit an account at a third bank, effectively hiding the mismatch. Other ways include fraudsters putting forth credible stories to manipulate staff into accepting the checks.
• Scams against consumers include when scammers require the consumer to return some of the funds from the check to them, usually via wire transfer. The check then bounces, so the victim loses all funds wired to the scammer.
• Money mules (walkers) are a particularly insidious type of check fraud involving using vulnerable individuals as "walkers" to traffic stolen or compromised checks. These money mules are often elderly, disabled, financially vulnerable, or homeless individuals who are recruited by fraudsters to deposit fraudulent checks in person. The fraudsters then collect the funds from the deposited checks, leaving the money mule with a small commission for their participation in the scheme. This type of check fraud takes advantage of susceptible individuals who may be desperate for money and unaware of the consequences of their actions.

​How NICE Actimize Helps

NICE Actimize's fraud detection and faster funds availability solution helps FIs avoid the risks of fraudsters looking to deliberately manipulate check deposits and defraud banks, all while satisfying legitimate customers with faster funds availability. For more information, go here.

 

¹ Financial Crimes Enforcement Network: FinCEN Alert on Nationwide Surge in Mail Theft-Related Check Fraud Schemes Targeting the U.S. Mail (2023)