Leverage modern check fraud prevention with Parascript

Is your institution’s current fraud prevention strategy strong enough to protect customer assets and your reputation? With fraud on the rise, outdated technologies and processes are prime targets for fraudsters who employ ever-evolving strategies targeting to exploit such vulnerabilities.

Listen as Ati Azemoun, VP of Business Development for Parascript, provides insight into the current financial fraud landscape and offers actionable solutions for banking software developers and financial institutions looking to improve check processing and reduce risk.

BAI Solution Spotlight presents Parascript—integrate innovative fraud detection solutions into banking software and existing systems that supports accurate data capture and signature verification wherever checks are handled.

Don’t miss the other insights, methods and tools that can help your financial institution shape and evolve its fraud strategy and prevention tactics in the BAI Deep Dive: Mitigating fraud threats.

TRANSCRIPT:

Ati Azemoun, Parascript:Thank you for having us today. My name is Ati Azemoun from Parascript. We are a recognition technology company and we wanted to share with you some of the things that we’re seeing out there in the market, particularly as it relates to check fraud, check fraud prevention, and some of the elements we see with our partners and our clients out there.

Just to give you a little background on who is Parascript. Parascript is a recognition technology company located out of Colorado. We’ve been there since 1996 and very much supporting a number of large to small financial technology providers, solution vendors, as well as certain end users who care to have solutions in-house. But we are behind the scenes, helping folks with their process automation, analysis of the various documents and also within the check fraud area.

So right now you may have noticed that check fraud is very much top of topic, unfortunately, and it’s been a trend since 2021 and before where with COVID, a lot of the mail was being intercepted and check fraud has been continuing to rise. It was reported in 2021 going into 2022 that the number of fraudulent activity in the reports from FinCEN was almost double, and that hasn’t really slowed down. It’s continued to grow. And in 2022, it was also reported that approximately 21 billion was associated to check fraud losses. So, it’s a problem and it continues to grow. It’s estimated that it will be over 25 billion as far as some projections from some of the experts out there.

So, what we’ve noticed really is a high demand for check washing issue. This is something that’s continued to grow particularly over COVID as fraudsters are intercepting checks. They’re lifting off the data that’s written on the check using household chemicals, essentially putting into a wash tray of some sort, lifting off that data and then populating the information they want for a desired account where they want to submit those checks. Those are good checks that were written. Let’s say it’s grandma writing to a grandson for their birthday, and unfortunately it doesn’t reach that location.  

The forces have gone in and swiped that check out of the mail and has now washed it, and now they’re putting it into an account that they’ve opened using fake IDs and making it payable to that ID, and then they’re going and getting whatever cash they can to run away with the money. So it is a big problem. It’s been estimated around 815 million to a billion U.S dollars is lost annually through the check washing scheme.  

More recently, the forces are also getting more creative. They’re starting to make their own checks very similar to the real checks, but fortunately there’s technology to help prevent this. So we have a capability now to analyze the full check to make sure that everything looks legitimate and if there’s been some alterations, to be able to flag and present that information to the users of the solution within the bank, financial institution, or the service provider to say, this is perhaps a suspect. You may want to hold those funds and not necessarily release the funds to that account as quickly as you would to a known member, to a known good transaction.  

So as this growing trend of check fraud expands, the forces are definitely getting stronger at creating their own solutions. And what they’ve done is they’ve applied AI in building very good looking real checks, and again, fortunately there’s technology to combat this as well. So as we look at this visual here, we have capability to review and assess a signature. This technology has been around for quite some time. Some institutions will look at certain dollar amounts on checks or certain account types to protect the individual and that full transaction, verifying the signature of a good check of the client against the check that comes in.  

Let’s say you lost your checkbook and somebody pretends to be you. As well as they try, they can’t really fool the AI-based technology inside to make that match and help the user of check fraud processing solutions within the financial institution to flag and say that this is a suspect item. So this technology can help reduce the number of losses and also to save the reputation of the institution.

What we see is stock review technology, and here again, it’s a reference of good checks that the bank has seen to the account, to the member. And on the left side you see a check stock item that’s coming through that may have been altered. Even though the forces may be very clever in creating very real looking checks, this technology is going to be able to reference what was coming through as good items and flag instances that are going to be a real problem. Again, helping the users of such technology to catch fraudulent activity earlier on rather than after the fact.

So our goal here at Parascript is really to aid in the full process. What we’re looking to achieve is to have good, smooth, clean transactions every time. If there’s some anomalies, we look to identify them, present them through the software to users of the technology within our application, as well as lifting good clean data with highest accuracy. We achieve this through AI-based algorithms within our product, and that gets presented in their finished solution to users of this technology.  

Most institutions will subscribe to services or offer services such as payee match positive pay to help combat this area, as well as the signature verification check stock analysis that we mentioned. Just to expand a little bit about signature verification, it can also be a type of a biometric, which upon opening an account, you may capture that person’s signature. Or if a force is now trying to present a bad check item and they’re looking to make a signature at their, let’s say, a point of service, you may challenge them by asking them to sign again. They’re going to have trouble making that happen and the technology will give you a confidence score to perhaps catch that suspect activity.

I hope that this has been helpful for you want to raise awareness to this growing concern, but also to let you know that there is AI-based technologies out there that are going to aid and assist in the full process. So I hope that’s been helpful for you. If you have any questions, please feel free to reach out to your solution providers or to us here at Parascript. Thank you very much.