“Cheque” Fraud: Not Only a US Problem

• Cheques are spelled differently in Europe, but enjoy the same popularity in many areas
• Cheque fraud has grown by leaps and bounds in recent years
• The answer for "cheques" is the same as it is for "checks"

Source: hsbc.uk

 

It is important to understand that while check fraud is a significant problem in the US, similar trends are occurring in Europe as well. In Europe, there was a shared view of paper checks as a payment vehicle on the road to the junkyard years ago -- only to find out that it remains a popular payment method in many countries, no matter how you spell it.

Understanding the Cheque Fraud Landscape in Europe

NICE Actimize reports that, despite decreases in cheque (yes, we're going to go that way for this installment) transactions in recent years, there are significant increases in cheque fraud across the UK.

In the UK, from a very low base, a rise from £20.6 million in 2018 (£3.3 million in H1 2018) to £53.6 million in 2019, a 161 percent increase. In the U.S., losses increased from $789 million in 2016 to $1.3 billion in 2018. In France, losses have increased to 450 million Euros in 2018, a 53 percent increase

According to UK Finance, the most recent UK figures make interesting reading with significant increases across cheque fraud types:

• Counterfeits are up 159 percent to £41.3 million
• Forgery is up 88 percent to £6.4 million
• Fraudulently altered cheques are up 379 percent to £5.9 million.

Fraud Types in Europe Eerily Similar To US

The types of cheque fraud in Europe are not unlike what is occurring here in the US. NICE Actimize identifies five primary types of fraud:

• Counterfeits is where the whole cheque is fake
• Altered and forged cheques
• Uncleareds fraud or cheque kiting
• Conversion
• Scams against consumers (when, for instance, the consumer needs to return some of the funds sent by the scammer by cheque, usually via wire transfer)

And the similarities do not stop there...

Reasoning Behind the Increase in Cheque Fraud

NICE Actimize reports that, as of ten years ago in the UK, cheque fraud had dipped so low that cheque losses for a year were equal to three days’ worth of card-not-present (CNP) fraud! While the losses were not as low in the US, the industry saw a similar occurrence.

That soon changed, however:

With the introduction of image clearing, remote deposit capture and faster clearing speeds, we are seeing the fraudsters coming back to attack these changes, hunting for weaknesses and unfortunately often finding them. In the UK, banks no longer have the actual cheque, which can make spotting counterfeits even harder.

It doesn’t help that many customers’ have the perception that cheques are safer than online and mobile banking. Don’t forget that a cheque you share and send unsecured in the post includes your account details, name and a copy of your handwriting and signature.

Banks invested in new technologies to introduce new deposit channels and increase customer satisfaction by decreasing the turnaround time for funds availability to their customers. In doing so, fraudsters migrated back to cheques to identify and exploit the weaknesses and commit fraud.

Sound familiar?

Solving the Cheque Fraud Problem with Technology

Not unlike banks in the US, European banks need to invest in technologies to detect fraud attempts before fraudsters are able to access the funds. NICE Actimize notes that FIs tend to either do cheque image analysis to identify frauds on the cheque itself, or they will undertake some sort of transaction analysis looking for fraud. The key is to combine these techniques and also employ Artificial Intelligence to mine a richer data set of customer behavior.

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