Check Fraud Statistics 2023: Revealing Alarming Trends and Numbers

As a global leader in the fields of check fraud detection, check fraud prevention, and image recognition solutions, we at OrboGraph are committed to remaining at the forefront of fraud detection and prevention in the financial industry. With the rapid evolution of technology and the increasing sophistication of fraudsters, staying informed on the latest trends and insights related to check fraud is essential for senior executives in banks’ fraud departments. In this article, we’ll be discussing alarming trends and statistics for check fraud in 2023.

Over the past few years, there has been a significant uptick in the number of Suspicious Activity Reports (SARs) related to check fraud filed by financial institutions across the country. In 2022 alone, SARs filings for check fraud increased dramatically, and the trend is expected to continue well into 2023 according to recent reports.

As we strive to protect our banks and clients from these evolving threats, it’s crucial to evaluate our current processes, resources, strategies, and technologies to ensure we’re taking the necessary measures to mitigate the risk of check fraud. By staying informed on industry trends and adapting our approach, we can continue to provide the highest level of service and protection in the face of these challenges.

Overview of Check Fraud in 2023

In 2023, we observed a significant increase in check fraud incidents. According to a special report from Reuters, check fraud-related SARs nearly doubled between 2021 to 2022 (350,372 and 683,541 respectively). Running a search through the Financial Crimes Enforcement Network (FinCEN), check fraud-related SARs reveals that high level has been maintained, with 564,213 SARs reported through October 2023. 

A noteworthy trend observed in 2023 is the surge in mail thefts related to check fraud. The USPIS reported that there were 305 incidents of mail theft involving letter carriers in the first half of 2023. Additionally, high-volume mail theft from receptacles like blue collection boxes has drastically increased, with more than 25,000 cases in the first half of 2023 alone.

To mitigate this growing challenge, we believe it is essential for financial institutions to:

• Regularly assess the effectiveness of fraud prevention and detection technologies
• Stay updated on the latest fraud trends and potential vulnerabilities
• Maintain open communication channels for reporting suspicious activities
• Train employees to identify potential check fraud and report it promptly

By taking these proactive steps, we can ensure our financial institutions remain one step ahead of the fraudsters and continue to protect their valuable clients.

Check Fraud Numbers and Analysis

In this section, we present an analysis of recent check fraud statistics and alarming trends observed in 2023.

The number of checks collected by the Federal Reserve has dropped by 82% over the last 30 years; however, as noted earlier, check fraud incidents have nearly doubled between 2021 to 2022, with 2023 maintaining a trend to at least match, if not increase, from the 2022 numbers. 

Independent findings from different research companies and vendors show some appalling statistics over the past few years: 

• Auriemma Roundtable: Check Deposit Fraud was up 385% in 2022
• NICE Actimize: Check Attempted Fraud $ Amount up +171% in 2022
• Datos Insights (Previously Aite-Novarica):
  • 100% of respondents report increase in Third Party Check Fraud Losses
  • 93% of respondents report increase in First Party Check Fraud Losses 

In addition to the reported numbers, we have seen a major increase in stolen checks being sold on the dark web. According to Dr. David Maimon, Professor at Georgia State University and Founder and Director of the Evidence Based Cybersecurity Research group,over 9000+ stolen checks are reportedly listed each month on just 80 groups on the dark web and other encrypted messaging platforms like Telegram. Furthermore, cybersecurity company BlueVoyant reports that dedicated check fraud IM channel groups have grown over 500% since January 2022. 

Given the adaptability and persistence of fraudsters, It’s vital to remain vigilant and proactive in addressing check fraud. By staying knowledgeable about current trends and leveraging cutting-edge technologies, we can help our clients ensure the highest level of protection against fraudulent check activity.

Critical Context and Implications of Check Fraud

Check fraud can take different forms, such as:

• Counterfeits: Using advanced printing technologies to create fake checks that appear genuine.
• Alterations: Modifying the details on an existing check, such as the payee name or the amount.
• Forgeries: Imitating a legitimate signature to authorize a check without the account holder’s knowledge.

The implications of check fraud on banks are severe, including:

1. Financial losses: Large sums of money can be lost due to successful check fraud schemes, resulting in reduced profitability for banks.
2. Reputational damage: Banks may experience a loss of consumer trust and confidence, leading to decreased customer retention and difficulties in attracting new businesses.
3. Legal and regulatory issues: Failure to properly detect and prevent check fraud may lead to regulatory fines and legal repercussions.

Putting the numbers in perspective, we cite the recent news on check fraud losses from Regions Bank. In its third-quarter earnings call held on October 20, 2023, executives from Regions Bank reported some shocking check fraud loss numberss:

• Q1 2023: $20M in check fraud losses (“Normal level”)
• Q2 2023: $82M in check fraud losses
• Q3 2023: $53M in check fraud losses
• Q4 2023: Estimated $25M in check fraud losses

The estimated total of fraud losses from check fraud at one single bank is an estimated $155M. 

It’s more important than ever to adopt a proactive approach, staying informed about the latest advancements in fraud detection and prevention, in order to mitigate the risks associated with check fraud. 

Preventing Check Fraud

As a global leader in check fraud detection and prevention, we understand the critical importance of safeguarding against check fraud in the financial industry. With the alarming trends and numbers associated with check fraud in 2023, we recommend implementing the following technologies in order to minimize risk and protect your bank’s assets.

1. Image Forensic AI: Image forensic AI takes a forensic documentation approach – a subcategory of the forensic field, dealing with the authenticity of the documents – to analyze the images of deposited checks. The technology leverages a multitude of analyzers including Check Stock Validation (CSV-AI), Automated Signature Verification (ASV-AI), Writer Verification (WV-AI) and Alteration Detection (AD-AI) to detect counterfeits, forgeries, and alterations.
2. Behavioral/Transactional Analysis: Behavioral/Transactional Analysis leverages artificial intelligence and machine learning to identify anomalous behavior and transactions within an account. By monitoring the account activity, the technology is able to sort through hundreds, if not thousands, of transactions to learn the account holder’s financial spending to not only identify anomalous behavior/transaction but also identify if accounts are being used for nefarious purposes. 
3. Payee Positive Pay: Payee positive pay for business checking accounts extracts the payee name, amounts, and account number to be compared to the issue file or negative/positive payee lists. This enables banks to identify if a check’s payee or amount fields have been altered, or if a counterfeit check has been created and deposited before the payment is posted. 
4. Consortium Data: Consortium data (an agreement, combination, or group [as of companies] formed to undertake an enterprise beyond the resources of any one member) enables banks to share transactional information with other consortium members. This enables financial institutions to run different verification checks such as counterfeit, non-sufficient funds (NSF), Closed Accounts, Duplicate, and other fraudulent items. 
5. Dark Web Monitoring: Dark web monitoring searches the dark web, along with other messaging platforms, to see if an account holder’s information or checks are available for sale. This enables the financial institution to close the account and notify their customers of the threat of identity theft.
   

Implementing these technologies can greatly reduce check fraud occurrences within your bank, protecting both your institution and your customers. As we continue to develop and implement cutting-edge solutions, your bank can remain at the forefront of fraud detection and prevention in the financial industry.