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Check Fraud

From counterfeits to forgeries, check fraud has become "the number one way criminals today are attacking our financial systems," according to the chief of the US Agency's Financial Crimes Division.

At the 22nd Annual Fisca Conference and Exposition in Las Vegas, NV, FinCEN Director James Freis, Jr. stated, "Despite law enforcement's very necessary focus on combating serious and organized financial crime, including terrorist-related activities that remain an ongoing threat – one of the simplest & most prevalent ways to commit financial crime, to steal money, is to commit some form of check fraud." The US Secret Service estimates the toll of check fraud just in the United States is $5 billion a year. Below you can find some more alarming statistics regarding this unrelenting, fraudulence trend:
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Check Fraud Facts

Checks remain the payment type most vulnerable to fraud attacks.85% of affected organizations report that checks were targeted. 14% of organizations that were victims of at least one attempt of check fraud during 2011 suffered a financial loss.
Among organizations, the typical loss resulting in payments fraud was $19,200. Loss situations are primarily due to a failure in following their own fraud policies. Because of this, 80% of surveyed companies have employed practices like positive pay and daily reconciliations to mitigate fraud.

Check fraud is the second most common scheme that institutions face, ranking ahead of phishing and not far behind payment card fraud. 76% of banks ranked check fraud second amongst the top fraud threats they faced in 2011. 73% of banks reported check fraud losses in 2010, totaling approximately $893 million. Attempted check fraud against bank deposit accounts amounted to some $11 billion in 2010. Survey results showed that 70% to 80% of B2B payments are still made via check.

According to Ernst & Young more than 500 million checks are forged annually, with losses totaling more than $10 billion. An additional report issued by industry banker’s magazine, American Banker, estimates losses from check fraud will grow by 2.5% annually in the coming years.

According to the National Check Fraud Center, check fraud and counterfeiting are among the fastest-growing problems affecting the nation's financial system, producing estimated annual losses of $10 billion and losses continue to rise at an alarming rate annually.

Richard Oliver, Executive President of the Atlanta Federal Reserve, stated in a May 2011 press conference: "While the exciting and glamorous fraud topics today involve wire fraud, account takeovers, ID theft and skimming, the results of the Association for Financial Professionals' annual corporate fraud survey remind us that the most fraud vulnerable instrument available today is the paper check."

The Losses
  • A 2009 ABA study reported 760,955 cases of check fraud reported in 2008, with actual losses estimated at $1.024 billion. An earlier ABA study from 2006 showed 561,306 cases and $969 million were reported in 2005, along with 616,469 cases and $677 million in 2002, as demon strated in the 2003 ABA study.

  • One in four money center size banks spent more than $20 million each in check fraud-related operating expense (not including actual losses).

  • The median expense was about $10 million for money center banks, between $500,000 and $1 million for regional banks, $50,000 $250,000 for mid-size banks and about $5,000 for community banks.

  • Organizations in the United States lose about 7% of their revenue to fraud.

  • 60% of all fraud incidents within a business involve employees.

  • The average fraud scheme goes undetected for 18 months.

  • In a survey of about 500 businesses conducted by Association for Financial Professionals, 85% said that their organization was impacted by fraudulent checks, while only 23% mentioned ACH debit, 20% mentioned corporate and commercial cards, 12% cited consumer debit/credit and just 5% cited wire transfers.

  • The number of checks written annually is predicted to rise by 2% - 4% through the year 2020.

  • At the same time, more than 1.2 million worthless checks enter the payment system daily.

  • The imprisonment rate for check fraud is only 2%.

Check Fraud Tips

With all the unsettling key points highlighted in the infographic below, it is essential to protect yourself against the potential check fraud threats. Generally check fraud starts with the theft of a check, so keep your checks as safe as possible. Review your checking accounts for fraudulent transactions regularly. Setup for bank alerts, if/when a check is being cashed from your account upon reaching a certain size. Print your checks instead of writing them, and when writing, always utilize a felt-tip pen rather than ballpoint. There are several manufacturers make pens specifically designed to prevent check washing, so consider investing in this money-saving tool. Additionally, drop off paid bills with checks at the post office or in a post office drop point; not in your mailbox. Do not leave blank space in the forms on your checks that someone can alter. Review your credit reports regularly. The Fair and Accurate Credit Transactions Act (FACT Act) requires the three major credit bureaus to provide you with one free credit report a year. Finally, utilize checks that have the latest security features built into them, like the checks sold at www.techchecks.net. These checks help to ensure financial security, without breaking the bank... along with the assurance that someone won't break into yours.

Source: http://www.stopcheckfraud.com/statistics.html
Source: http://www.ckfraud.org/statistics.html
Source: http://www.fairfaxcounty.gov/police/financialcrimes/checkfraud.htm
Source: http://www.networkworld.com/news/2012/032112-fraud-257521.html











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