Modernizing Omnichannel Check Fraud Detection

BEC, or business email compromise, is a species of scam that has been around for as long as businesses have used email. However, the sharp spike in remote working arrangements (including permanent changes to remote work) spurred by the COVID-19 pandemic has made it a much more tempting (and fruitful) target for scamsters. Attackers are taking advantage of the new need for off-site communications from employee home networks to their employers’ corporate networks.

As 2021 gets underway -- already fairly eventfully -- Trace Fooshee of Aite Group talks to BankInfo Security's Nick Holland about what fraud trends they foresee in the coming year. Mr. Fooshee notes that, early in the pandemic, FI consensus was to gird themselves for a significant rise in across-the-board fraud activity. However, the industry was somewhat surprised to see that conventional fraud -- debit fraud, check fraud, etc. -- did not spike all at once.

It was suspected cockfighting that got the attention of authorities at first. However, they found a wider spectrum of crime when they arrived at the home of this alleged perpetrator: “When MDPD arrived, they found evidence that made plain the home also doubled as the headquarters for a second illegal business: counterfeit check cashing,” U.S. prosecutors wrote in a court filing.

Craigslist can be a handy resource for buying and selling goods and services -- and it is also a very popular vehicle for scammers deploying simple check fraud tactics. On YouTube, Traveling Director demonstrated a common Craigslist scam by offering some furniture for sale. His asking price was $300, but he had "buyers" consistently send checks for much, much larger amounts of money. It's interesting to see the range of quality in the forgeries -- a couple of the checks he received are downright amateurish.

We have to admit feeling a bit of satisfaction when seeing a scammer get scammed. That's why this YouTube video is so entertaining. Wanting to document a step-by-step scam --- and trip up the scammer at the same time -- YouTuber Ben Taylor, whose channel is called Pleasant Green, is known for scam-baiting and scam-foiling. He tried to be voluntarily sucked into a classic "job posted on the internet" scam after hearing about a friend-of-a-friend being entangled.

OrboGraph's Exploration of Check Fraud in 2020 is a compendium of data gathered from a short, focused survey which was designed to "take a snapshot” of check fraud trends for 2020.

Simply put, check washing means you procure a check or checks by whatever means necessary, remove the amount and "pay to" information (the "washing"), and alter it to serve your own nefarious purposes. No chart needed. Not even a printer.

PaymentsJournal.com relays the news that, since the beginning of the COVID-19 outbreak, a LIMRA survey shows 40% of financial services firms have seen an increase in fraudulent activity. This has lead notable banks and even the FBI to actually issue fraud alerts to their communities. Current stay at home orders have led more and more people to -- wisely, in light of safety issues ---  do their banking digitally via apps and chatbots, making technology the primary barrier to fraudulent activity.

Karen Olson, Treasury Management Banking Officer and Vice President at Dubuque Bank and Trust, notes at TelegraphHerald.com that COVID-19 has forced many businesses to quickly change their methods of operation -- and, as a result, created additional avenues for payments fraud to occur.

Helpnetsecurity.com, quoting an Abnormal Security report, explains that there seems to be a peaking and plateauing of COVID-19-themed email attacks, an increase in BEC (Business Email Compromise) attack volume, and acceleration of payment and invoice fraud. Most of these scams rely upon impersonating a known company or brand. The report also uncovered changing trends in these brand impersonation attacks, a form of fraud where a bad actor assumes the identity of a trusted or known entity. Will it surprise you to learn, given the current remote meeting trends, that ZOOM (NASDAQ: ZM) became the most impersonated brand in Q2?

If you've been following the news, you've heard warnings about COVID-19 infection spikes as a result of seasonal and behavioral factors. Another unfortunate spike related to the pandemic is check fraud.

We've discussed at length the ways in which Image Analysis is a crucial tool in preventing and detecting check fraud. For instance, image analysis is deployed to “see the attributes of an image” and compare that to previously cleared checks for match purposes.

Having already announced our client and partner virtual technology conference in late September, OrboGraph has completed it’s speaker line-up for the ORBOIMPACT conference for the afternoons of October 29th and 30th (see agenda here). Day 1 (Thursday, Oct. 29): Healthcare Payments Sessions Day #1 is highlighted by Keynote speaker Mr. Michael Manna at 12:15 PM ET.  During the…

As we continue to explore the check fraud trends in 2020, an OrboGraph/Alogent collaboration brings this exciting webinar: The Future is Now: Industry Insights and the Role of Data to Mitigate Check Fraud and Modernize Deposits. In this unique webinar/streaming session, hosted on Thursday, October 22, 2020 from 2:00 – 3:00 PM EST, we will discuss…

The ABA Deposit Fraud Account Fraud Survey is the “official” industry benchmark when it comes to fraud trends and losses for banks and financial institutions. The latest version, released on January 1, 2020, is labeled as the 2019 report. The survey provided great depth and illustrated that fraudsters “went a little crazy” from 2016 to…

Research by TransUnion, whose flagship fraud prevention solution IDVision® with iovation® gives them intelligence from billions of transactions and more than 40,000 websites and apps, recently released their quarterly analysis of global online fraud trends found that fraudsters are decreasing their schemes against businesses, but increasing COVID-19 focused scams against consumers online.

It's a story becoming more and more common, unfortunately: On May 19, Stephen Holder of Franklin, WI lost his job because of COVID-19. Not to worry. Four days later Stephen got an alert for for a remote position via CareerBuilder. Things were looking up! Or were they?

OnPay Solutions President and CEO Neal Anderson minced no words in a recent interview with Pymnts.com wherein he discussed B2B payments fraud trends, including the growing threat of internal fraud. He went on to explain that organizations need to prepare themselves to address and mitigate the fraud threat, even as employees work from home.

BG Motor Cars owner Noman Beg was on vacation when he took a look at his bank account -- and noted, with considerable alarm, that a check had been written against his account for $33,525. Problem was, he had not written that check, nor did he foresee being able to cover it alongside normal expenses in the near future.

The “Check Clearing for the 21st Century Act,” also known as “Check 21” or “Check 21 Act,” launched on Oct. 28, 2004. Many are unaware that the terrorist attacks of Sept. 11, 2001—which grounded planes and caused major delays in check processing (preventing the transport of canceled checks to Federal Reserve banks)—was actually the event that spurred passage of Check 21.

While we mainly explore fraud and counterfeit scams from the payment side of things, it should be noted that the popularity of online shopping -- particularly during the COVID-19 pandemic -- has created a new breed of fraudster that creates and sells fake products. Meanwhile, Amazon is not immune from fraudsters, as reported in WIRED Magazine:

Motley Fool's The Ascent recently took look at FTC statistics in order to get a handle on mounting COVID-19 fraud losses losses to persons and businesses. COVID-19 fraud is defined in this case as any type of scam, fraud, or identity theft related to the novel coronavirus. Key findings from the report include: As of August 10, 2020, Americans have reported over 160,000 cases of fraud and losses of over $106 million.

A story from the New York Post features Case William Kelley, 42, who utilized a home printer to create a fraudulent check to successfully purchase a Porsche from an Oklahoma Dealer. This may sound like fake news...

Nigerian “419 scammer” goes big time “Hushpuppi” portrayed himself as successful and wealthy to recruit and fool victims It was a small error that eventually snared him By now, the phrase “Nigerian email scammer” has become a cliche to the extent that one wonders if they actually exist in the literal sense — a person…

An article by Antoinette Burnside, assistant vice president and product manager for Kennewick-based Community First Bank and HFG Trust, appeared in the Tri-Cities Area Journal of Business, describing how pervasive check fraud is feeding financial fraud in general.

Among the myriad fraud schemes emerging during the COVID-19 crisis are "money mule schemes." A money mule is “a person who transfers illegally acquired money on behalf of or at the direction of another.” These are scams that, frankly, take advantage of the desperation some persons and businesses feel due to to COVID-19 economic impacts. In this climate, actors are able to fairly easily deceive otherwise savvy victims by impersonating federal government agencies, international organizations, or charities.

Pymnts.com looks at the startling emerging story of a Germany payments company called Wirecard, where as much as $2.1 billion may be unaccounted for. The story notes that "even the largest companies with the most resources to digitize and combat fraud are not immune to the risk — from both within and outside of, the organization."

As seen in the above video, scammers representing themselves as officials of government agencies is a common tactic. Victims are caught off-guard by the scammer’s aggressive tone and threats of legal repercussions, raising the victim’s anxiety and clouding their judgement to extract money from them. The scammers have adopted a new angle, utilizing the pandemic to their advantage.

As noted many times both here and in the general media, check fraud persistent and pervasive -- and now compounded by fraudsters constructing corona virus-related scams. Financial institutions should be on high alert for scams and fraud schemes that target the institution itself and/or its customers. It is equally important for financial institutions to evaluate their current check fraud processes and technologies and identify any possible gaps.

This is a fairly typical fraud scheme that many, if not all of us, have encountered within our email inboxes. While we would normally mark the email as "spam," delete it from our inbox, and move on with our day, there is a reason fraudsters continue to utilize this scam. The emails are sent to a large number of email addresses in hopes to find a less technically savvy individuals.

According to Frank on Fraud, there are 16 main types of check fraud On the surface, check fraud growth defies logic A huge amount of check fraud goes unreported – – up to $1.2 billion in losses per year, in fact FRANK ON FRAUD is a terrific (and entertaining) blog by Frank McKenna, the Co-Founder…

Javelin Strategy & Research has made available their 2020 Identity Fraud Study (available for download here). The data presents a sobering outlook: The results of Javelin’s 2020 Identity Fraud Survey serve as a wake-up call—one that will force financial institutions, businesses, and the payment industry to reevaluate how identity fraud is managed. Total identity fraud reached $16.9 billion (USD) in 2019, yet the dollar loss is only part of the story. To have a more fulsome understanding of identity fraud a comprehensive evaluation of the drop in number of victims lead to several unsettling findings. Criminals are targeting smaller numbers of victims, while inflicting damage that is more complex to prevent or remediate.

The Office of the Comptroller of the Currency (under the jurisdiction of the US Department of the Treasury) has rolled out an easy-to-use check fraud and forgery resource at HelpWithMyBank.gov that represents a valuable and easily accessible tool for banks and their customers.

In April our post featured "celebrity fraudster" Matt Cox as he described his methods for perpetrating check fraud. He knows of which he speaks; he is the author of the book Shark in the Housing Pool: On the Run With the Secret Service's Most Wanted (out of 15 Amazon reviews, it has 14 five-star ratings -- but let's remember that the author is a professional fraudster...)

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.

You get a text from Costco offering you stimulus checks or packages because you're a loyal customer. Great news, right? The old saying "If it sounds too good to be true, it's probably not true" comes to mind...

The negative impact of check fraud really hits home when it happens to you, a friend or relative. Unfortunately, as we see in the following drama, you don’t get the Hollywood ending if you’re unprepared. A former colleague of ours, Eric Oliver, used to work for VSoft and Fiserv...

We've detailed various scenarios fraudsters contruct and provided the profiles of a fraudster, but what does check fraud look like from the vantage point of the fraudster? Matthew Bevan "Matt" Cox is an American former mortgage broker and admitted mortgage fraudster. Cox is also an aspiring author who wrote an unpublished manuscript entitled The Associates, in which the main character -- surprise! -- traveled the country to perpetrate mortgage fraud.

In these days of unprecedented events and protocols related to the coronavirus pandemic, it comes as no surprise that fraudsters of all stripes are taking advantage of any and all aspects of the situation.

The check is in the mail Fraud awareness Treasury checks and image analysis The old adage “the check’s in the mail” is somewhat appropriate right now as the government ramps up the stimulus program with $1,200 coming to many Americans. In the OrboNation blog post yesterday, we provided a quick estimate of the number of…

During 2019, more than 1.9 million consumers cashed FTC checks received as a result of law enforcement cases. When consumers don’t cash their refund checks, the FTC uses that money to send additional mailings to ensure the maximum amount of money is returned to consumers. Any remaining refund money is sent to the U.S. Treasury.

From the Federal Reserve Bank of Atlanta comes an informative overview of check usage entitled U.S. Consumers’ Use of Personal Checks: Evidence from a Diary Survey. The authors look at 1,600 individual transactions to gain an understanding of what check payments are currently used for—by dollar value, and by payee—and who uses checks (in terms of demographics and income).

OrboGraph recently co-hosted with Nice Actimize a dynamic webinar entitled Change is Inevitable - How Will You Respond? Along with OrboGraph's Joe Gregory, Allegra Angus and Nithin Mangalore of Nice Actimize discussed with attendees different aspects of check fraud trends, best practices for combating check fraud, including incorporating machine learning and image analysis.

Modernizing Omnichannel Check Fraud Detection An informative blog series exploring payments fraud and image technologies used to fight financial crimes. ACH Fraud Jumps – Are You Surprised? Checks represent a “big” target for fraudsters, but ACH fraud is growing faster ACH fraud growth, in fact, surprised industry leaders Has effective fraud prevention throttled check fraud…

Double-layered fraud: fraudsters who actually defrauded other recruits who thought they were "in on it" - both banks and accomplices alike we defrauded. To better detect fraud, banks need to strategically align their technologies.

Fraud attempts affected an estimated $25.1 billion held in deposit accounts, ABA’s survey found, with $22.3 billion protected per the Banking Exchange Prevention was the equivalent of $9 for every $10 in attempted fraud, per Dodd Frank Update Attempted check fraud spiked 43% in two years, per PYMNTS.com The American Bankers Association’s (ABA) 2019 Deposit…

ABA reported a significant check fraud uptick in 2018 data B2B payments are still dominated by checks – leading to more opportunities for fraud – is it overrated? Assessing real-time, Positive Pay fraud systems with image can stop fraud at various stages of the workflow Corporate Payments Landscape: Checks Still Rule in B2B The Wall…

Fraud techniques are evolving and check fraud is often intertwined with other types. Anyone involved in fraud detection and prevention needs to stay up-to-date, and Fraud Magazine offers some useful information.

2019 Federal Reserve Payments Study Reports 16B Checks Written Overall payments grew, while checks written declined Check fraud risk is increasing Checks lead other payment channels in fraud attempts per AFP It’s back! The 2019 Federal Reserve Payments Study, provides us new insights and metrics for the payment industry: The number of core noncash payments,…

Three kinds of check fraud dominate the pack Fraud has become more and more inexpensive to perpetrate Behavior analysis to fight cross channel fraud As fraudsters continue to evolve their tactics, it is important to understand what acts of fraud are being committed and what actions banks are taking in order to combat fraudsters. These…