Are Fraudsters Targeting Specific Types of Companies?
- Check fraud is rising, and annuity checks are a prime target
- Large deposits trigger bank holds, especially for elderly clients
- Advisors can help by encouraging advance notice and electronic transfers
Analysis of the types of checks being sold on the dark web and encrypted platforms like Telegrams reveals that some types of checks were seen as more valuable than others. As we noted a few years ago, personal checks typically sell for around $175, while business checks go for $250. What this shows that fraudsters put a higher value on business checks, most likely because the accounts tend to have higher balances.
However, a new trend may be emerging. Recently, OrboGraph's Marketing Manager and Fraud Detection Specialist had a conversation with an organization focused on personal loans. As Mr. Bi shared vital information about check fraud and what protections are available to them, it was brought to light that fraudsters may be targeting specific types of business that disperse large amounts of funds in single transactions.
Focus on Types of Companies
There are several different industries that appear to be targeted by fraudsters for check fraud. One example is from Insurance Newsnet's Annuity News, where Diana Rothfuss, director of Global Strategy and Innovation, Risk, Fraud & Compliance Solutions at SAS, notes that criminals are indeed increasingly targeting large checks from insurers and financial institutions — with annuity checks squarely in their crosshairs.
New York Life notes that annuity check payments can be dispersed monthly, quarterly, semiannual , or annually. Particularly in the case of the latter, the value of the check can be worth tens of thousands of dollars. Large annuity deposits are out of the ordinary for most bank customers, but annuity recipients are often elderly and prefer receiving their payments in the form of paper checks due to their familiarity.
And, as we know, the elderly are most susceptible to fraud and financial exploitation. While financial institutions have deployed stricter processes to protect the elderly, it's also causing friction between financial institutions and their customers.
According to Angie Welsh, founder and president of My Annuity Agents:
“The challenge is that every institution is working with different fraud detection systems. They don't use the same data and technology or rules and risk parameters. One bank might flag a $50,000 annuity check, while another would simply deposit it without a moment's pause,” explained Rothfuss.
Whether the check gets rejected or is just held for review becomes a significant pain point for an annuity customer, as they’re often counting on that money.
Protecting Commercial AND Personal Checks
One of the major issues for financial institutions and their customer base is the lack of education on check fraud -- and, in turn, what solutions are available to them. As noted earlier, Mr. Bi was able to educate an organization about reaching out to their financial institution about technology to detect check fraud, while also inquiring about payee positive pay -- a solution the organization had not yet heard of.
Unfortunately, this scenario is not uncommon. As we've noted previously, 65% of financial institutions have less than half of their treasury service clients using positive pay, and 39% have less than 25% adoption according to research from Alkami and Datos Insights. However, research shows that over 75% of banks expect check positive pay adoption to rise in the next two years.
Financial institutions can further protect their customer base by deploying solutions that can shield against on-us and deposit fraud. These technologies leverage a multi-layered technology framework with each layer providing additional defense, enabling banks to analyze and scrutinize each check several times -- which ensures that if a fraudulent item passes by one layer, it will be flagged by a different technology in another layer.