A Complete Guide on How to Report Check Fraud

Check fraud poses a substantial risk to the banking industry, impacting both reputation and financial stability. At OrboGraph, we understand the importance of confronting this challenge head-on and how to report check fraud. The ingenuity of fraudsters has evolved, with various types of fraud – such as counterfeit checks, forged endorsements, and altered payee and amounts – becoming increasingly prevalent. We must stay proactive in identifying these deceptive practices and reporting them efficiently to mitigate risks and limit losses.

Senior bank executives tasked with overseeing fraud departments must constantly evaluate and enhance fraud detection methods and technology. The deployment of sophisticated technologies like OrboGraph’s OrbNet Forensic AI for check fraud detection allows inconsistencies and irregularities that indicate fraudulent activity to be discovered in time to take action. The ability to report check fraud effectively hinges on leveraging these advanced tools coupled with a keen understanding of the tell-tale signs of scam attempts.

At the same time, strategies must encompass thorough training for staff in recognizing and responding to potential fraud, as well as fostering a culture where timely and accurate reporting is standard practice. Through a collaborative approach integrating robust analytical tools, we ensure a formidable defense against fraudulent activity. Further, by constantly optimizing our processes, we continue to uphold the integrity of banking operations and safeguard institutions against the epidemic of check fraud.

Understanding Check Fraud

Because check fraud is a prevalent issue that adversely affects the banking industry, its customers, and the economy at large, financial institutions must understand the various forms of check fraud, how they are carried out, and their impact in order to effectively recognize and combat these fraudulent activities.

Common Types of Check Fraud

Altered Checks: Culprits change the name of the payee or the amount on the check to redirect funds. 

Counterfeit Checks: Scammers create and print fake checks that mimic legitimate checks from unsuspecting businesses or individuals. 

Forged Checks: Individuals steal legitimate checks from businesses or other individuals and forge their endorsements. 

Stolen Checks: Illegally obtain checks either by directly stealing them or purchasing them from other criminals. 

Check Kiting: This involves writing checks from a bank account with insufficient funds and taking advantage of the float time to create a false balance.

How Check Fraud Occurs

Fraud can happen in numerous ways, from sophisticated schemes to basic methods like stealing mail. Scammers may forge signatures or alter information on a check, or they could leverage digitally created counterfeit checks, deceiving even the most cautious individuals. Technologies that can protect checks deposited in any channel are essential to deter these activities.

Impact on Victims and the Economy

Individuals: Victims of check fraud can face depleted bank accounts and a long process to possibly get their money back. 

Banking Industry: Financial institutions may experience significant losses – potentially in the billions – across the industry due to fraud, putting a strain on resources and reputation. 

Economy: When robust prevention measures are in place, the economy can experience enhanced trust in the banking system and reduced financial loss.

We at OrboGraph take pride in our ability to deploy innovative technologies to safeguard transactions and maintain the integrity of the banking system. It’s our responsibility to ensure that the industry and its clientele are protected against the disruptive effects of check fraud.

Preventing Check Fraud

As leaders in the check fraud prevention industry with a keen focus on check fraud prevention, we understand that safeguarding against fraud is a multifaceted endeavor that requires robust measures. We prioritize secure banking practices, consumer vigilance, and effective business policies to combat potential fraud.

Secure Banking Practices

Deployment of advanced validation and detection systems are critical in securing banking practices. These systems are instrumental in recognizing and identifying issues with checks, thereby preventing losses at the paying bank and its customers. By deploying the latest technologies, banks can ensure the integrity of each transaction and protect their customers from potential losses.

Consumer Vigilance

It’s imperative that consumers stay alert and on the lookout for any signs of check fraud. We encourage customers to regularly review their statements, reconcile bank accounts, and report unrecognized transactions swiftly. In the case of lost or stolen checks, consumers must promptly alert their bank to place a stop on the draft and deploy checks with OCR check processing to deter fraudsters.

Effective Business Policies

Education of employees as astute observers of fraudulent behavior is critical. Implementing compliance risk management helps maintain corporate governance standards and align them with industry best practices. We also recommend banks offer their corporate clients services like Anywhere Positive Pay to protect against altered checks, a critical layer of defense in our comprehensive fraud prevention strategy. This approach involves continuous evaluation and enhancement of internal policies to stay ahead of evolving fraud tactics.

Combating check fraud demands an integrated and proactive approach. As we continue to invest in technology and resources, we also recognize the indispensable role of informed customers and meticulous business policies in fortifying the banking ecosystem against fraudulent activities.

Reporting Check Fraud

In an industry where check fraud poses a significant risk, understanding the exact steps to address and report such incidents is crucial. Our role not only entails implementing top-notch verification technology but also ensuring that efficient and effective reporting mechanisms are in place.

Steps to Report Check Fraud

1. Identify the Fraud: Promptly review any checks that return as suspicious. Utilize technologies like payee verification to confirm the legitimacy of the payee.
2. Document Everything: Collect and record all evidence, such as altered checks and correspondence related to the suspected fraud.
3. Contact Financial Institutions: Notify all relevant banking entities immediately to take necessary actions like stopping payments or closing accounts.
4. File a Report: Submit a fraud report with the Federal Trade Commission (FTC) and consider reporting to local law enforcement for a more directed response.

Authorities and Organizations

• Federal Agencies: The FTC and the U.S. Postal Inspection Service are the primary federal agencies where fraud can be reported, especially when mail is used to perpetrate the fraud.
• Internet and Cybercrime: For cyber-related check fraud, the Internet Crime Complaint Center (IC3) and the Federal Bureau of Investigation (FBI) are key resources.

Legal Actions and Recovery

• Consult Legal Counsel: Obtain legal advice to explore the possibilities of recovery through civil remedies.
• Monitoring and Recovery Services: Implement real-time monitoring to quickly identify and mitigate future fraud attempts, enhancing the potential to recover funds.

In bank’s ongoing efforts, deploying advanced technologies not only strengthens check fraud detection but also underpins the integrity of our response to check fraud incidents. 

Aftermath of Check Fraud

When check fraud occurs, the priority shifts to addressing the consequences and taking steps to rectify the situation and prevent future incidents. The following actions are vital in mitigating the aftermath of check fraud.

Restitution and Recovery

Once a case of check fraud is confirmed, immediately investigate the breadth of the fraudulent activity. Prioritize your client’s needs, ensuring a transparent process while working diligently to recover any lost funds. Your approach should involve direct engagement with law enforcement and legal routes to seek restitution and recover assets. While the chance of full financial recovery varies, fraud investigators should use all the tools available to remedy the situation and recover lost funds.

Monitoring and Protecting Your Identity

Experiencing check fraud often means identity theft risks are heightened. Banks should advise clients to rigorously monitor their credit reports for any irregularities. Partnering with cybersecurity experts enables continuous supervision of accounts to intercept and address identity breaches swiftly. To aid in this effort, we suggest placing fraud alerts or a security freeze on credit card and banking accounts, making it more challenging for fraudsters to further alter financial information.

Preventing Future Fraud

Prevention is always a step ahead of cure. Staying on top of new trends, along with continuous education of employees, are key components to preventing fraud. Additionally, the deployment of the latest technologies like AI and machine learning are invaluable in monitoring behaviors for potential “drop accounts” used by criminals to launder money. 

Emerging Threats and Research

In our efforts to mitigate check fraud, it’s important to stay informed on the latest fraudulent behaviors and prioritize research that bolsters our defenses. Here we explore key areas where threats are evolving and research can shine a light on robust preventive measures.

New Trends in Fraud

Fraudsters are continually refining their tactics, and mail theft has seen a surge, leading to an increase in fraudulent activities such as check washing and counterfeits. Utilizing data analytics to identify trends is key to recognizing new fraud schemes.

Understanding How Fraudsters Operate

Since the pandemic, we have seen a massive increase in mail theft and mail carrier robberies – focused on stealing paper checks. A majority of these checks end up on the dark web, where criminals are selling these to other criminals to perform check fraud. Additionally, these criminals are also selling services such as check washing, check counterfeiting labs, drop accounts, and mule services, as well as lessons on how to perform check fraud. Knowing how fraudsters operate can help banks keep in front of the fraudsters.

Collaboration and Community Efforts

A coordinated approach can significantly boost our capacity to tackle fraud. We at OrboGraph believe in the power of the community to share knowledge on bad business practices and learn about preventive technologies. This is why we’ve established the OrboGraph Check Fraud Roundtable – a financial institution-driven series of organized meetings to share experiences, trends, and prevalent fraud use cases while identifying key technological barriers within check fraud. 

No bank can tackle the challenge of check fraud alone. By collaborating with other financial institutions, while deploying the latest technology like image forensic AI to detect fraudulent checks, banks can effectively protect themselves and their customers from substantial check fraud losses. 

Solution to the Check Fraud Pandemic

OrboGraph has been delivering proven results to combat check fraud for over 15 years. The solution to identifying the unique characteristics of today’s check fraud is based on a blend of AI-based technologies, which we refer to as image forensics.

There are several modules available from OrboGraph that can help:

• Anywhere Fraud is a specialized module within OrboAnywhere designed to detect check fraud by interrogating the attributes of check images to create a risk score based on the probability of the item being a counterfeit check, forged signature, or altered check. Building upon these scores, the system uses self-learning account profiles to create a statistical representation of the account’s check writing habits and styles. Anywhere Fraud also includes targeted transaction analysis.

• Anywhere Positive Pay uses targeted OCR on images of pre-printed business checks and compares the recognized payee names to the payee field of the issue file to proactively identify payee alterations.
• Anywhere Validate automatically validates the negotiability of paper-originated items for any self-service, centralized or distributed capture channel or image exchange trading partner within the omnichannel of a financial institution. Designed to minimize the risk of checks and cash equivalent images from being non-negotiable, the system is a more comprehensive approach compared to traditional image quality, image usability, and/or manual review processes.
• Anywhere Compliance uses advanced check recognition technologies to extract a range of field data from checks and other paper-originated negotiable payments.  Fields include the payor, payee, bank and amount data. This information is then used to mitigate compliance risk in the areas of OFAC, BSA/AML, Reg CC, UCC and KYC.
• Anywhere Payee utilizes enriched recognition technologies applied to the payee field on personal and business checks as a method to validate the correct “pay to the order of” name on a check to detect and reduce deposit fraud. Certain workflows are more sensitive to having the correct payee on a checks where posting errors, illegal payees or fraudulent payees are prevalent. 

Schedule a Demonstration

Leveraging OrbNet AI and OrbNet Forensic AI technology for check processing and check

fraud detection. Schedule a demonstration.