NICE Actimize Joins BAI Podcast to Discuss Financial Crimes and Check Fraud
- Check fraud has continued to grow
- Emphasis on digital channels left checks relatively unguarded
- Technology & collaboration are key to meeting the check fraud challenge
As we near the end of 2024, It's important for financial institutions to reflect upon what has occurred during the past 11 -- soon to be 12 -- months, and gear up for 2025. Unfortunately, for many banks, 2024 was another year of growth for check fraud. 75% of banks named check fraud as a top concern according to research from Jack Henry & Associates, and we will likely see that number increase.
With that in mind, Brian Keefe, senior pre-sales consultant and a fraud expert at NICE Actimize, joined host Rachel Koning Beals on the BAI Banking Strategies Podcast to discuss steps FIs must take to fight ongoing -- and quickly evolving -- check fraud.
Focusing on Digital Channels and Instant Payments Enabled Fraudsters to Exploit Checks
While the banking industry has shifted focus to digital channels and instant payments, check fraud continues to be a major problem that financial institutions can't afford to ignore. As noted in the podcast, many FIs -- both large and small -- let their guard down when it came to check fraud detection, turning their attention to digital channels and instant payments.
So, why -- in the digital age" of banking -- are there growing instances and varieties of check fraud? Mr. Keefe cited a "pull-back" on resources addressing check fraud in a digital world:
So I think we start off with the introduction of the digital world, the use of real-time payments, whether it be a Zelle payment or the other instant payments methods that are out there today that institutions are now adopting and believe are going to be mainstream. Not so much forgetting about check fraud, but maybe putting less resources in the monitoring of that. And it’s sort of come, I won’t say full circle, but the emphasis has been brought back to check fraud in ways to more accurately monitor [check fraud], than [previously] thinking that is a way of the past. Because we still see with the check fraud today, whether it be from a commercial perspective or an individual perspective, has come full circle and really wreaked havoc on a lot of institutions, large and small.
This is something that OrboGraph's Marketing Manager and Fraud Detection Specialist, James Bi, has cited during his many speaking engagements this past few years. As Mr. Bi explains:
Over the past several years, I have had the pleasure of speaking at various banking industry events and conferences [in-person and virtual] on the topic of check fraud. My presentations always start with a quick overview of the check market itself, focusing on the sentiment that "checks are dead." This is a sentiment that has carried on for decades and has led to financial institutions choosing to put their resources toward other payment channels. Unfortunately, this is a major reason that fraudsters jumped onto check fraud and financial institutions have spent the past few years trying to play catch up.
Additionally, fraudsters are not settling for tried-and-true methods; instead, they are constantly finding new ways to steal checks from mailboxes, counterfeit or alter checks, and exploit vulnerabilities in banks' fraud monitoring. This is especially damaging for smaller banks, where a single large fraud incident could be crippling.
Key Takeaways from the Podcast to Combat Check Fraud
The podcast offers the following key takeaways that banks need to consider for 2025:
- FI's Cannot Ignore Checks and Check Fraud: While checks are indeed declining in volume (at a slower rate than many industry pundits expected), a recent report from AFP notes that 70% of business do not have plans to discontinue checks as they preferred payment.
- Consider Cloud Deployments: Cloud deployments offer the ability for financial institutions to layered several different technologies, including image forensic AI and behavioral analytics. It also allows FIs of all sizes to economically scale and adapt to changes in the market.
- Sharing Fraud Trends and Data: For most of their existence, FIs have been hesitant to share data and information with other FIs, as they feel this can expose them or lessen their competitive edge. However, when it comes to check fraud, sharing data is crucial -- particularly in deposit fraud. This is why consortiums are becoming a key component, as shared fraud data helps curb check fraud.
In order for the industry to tackle the challenges of both on-us and deposit fraud, FIs will need to utilize the right technologies, as well as encourage collaboration amongst FIs, fintech fraud vendors, and even local law enforcement agencies. Fraudsters continue to evolve, adapt, and leverage the latest technologies to their advantage (an industry expert notes that fraudsters are one to two generations ahead of FIs -- more information will be disclosed in an upcoming Wespay Podcast featuring OrboGraph's James Bi, so be on the lookout!).
The question still remains: Will FIs adapt and take on the fraudsters, or continue to ignore checks?