Combatting Check Fraud Requires a Team Effort

Despite the shift toward digital payments, check fraud remains a major threat to banks, costing $27 billion globally in 2023, according to Nasdaq’s Verafin. Although the number of checks in circulation has drastically declined over the years, the crime’s scope has only increased, with fraudsters finding new ways to exploit vulnerabilities. According to a new article in The RMA Journal, here are key takeaways for banks to consider: 

• Mail theft is a primary driver behind the surge in check fraud. Criminals target U.S. Postal Service boxes and mail carriers to steal checks, which are sometimes sold on dark web marketplaces. In fact, Recorded Future’s research found that 50% of stolen checks are posted online within eight days. 

• A complex network of criminals is involved in check fraud, from those stealing physical checks to producers of fake credentials and buyers who cash in doctored checks. According to David Maimon, director of Georgia State University’s Evidence-based Cybersecurity Research Group, “This is an illicit supply chain that is very adjustable and adaptable,” making it difficult for banks and law enforcement to target fraud at its source. 

• Technology solutions have limitations. While banks are investing in technology, such as optical character recognition and artificial intelligence, to detect altered or counterfeit checks, the multi-channel nature of the crime complicates prevention. Additionally, rules-based algorithms, while helpful, often generate false positives, draining investigative resources. 

• Collaboration is crucial, as this challenge affects all financial institutions. Banks are increasingly recognizing that partnering—internally across IT, cyber, and fraud teams, with other banks, and externally with regulators and law enforcement—is essential to combating check fraud effectively.  

Check fraud may be low-tech, but its evolving tactics make it a high-stakes issue for banks. Enhanced vigilance, investment in technology, and greater collaboration will be key in addressing this persistent threat.