Tellers Get More Comfortable (And Cut Risk) With Anti-Check Fraud Tools

January 16, 2012, By Kevin Jepsont

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Tellers at KEMBA Financial CU here feel more comfortable accepting checks, thanks to a new tool that simultaneously identifies counterfeits and closed or NSF accounts.

"Tellers' confidence has increased because they're getting so much more information about each check," explained Tracy Bachman, director of branch operations at the $652-million credit union. "They no longer feel leery about whether to take a check or put a hold on it, and our check losses continues to decline."

KEMBA has avoided more than $260,000 in potential losses since 2009 when it deployed TrueChecks technology from the Advanced Fraud Solutions (AFS) of Kernersville, N.C., she said.

The counterfeit-check solution was enhanced in May when AFS integrated TrueChecks with the Deposit Chek service, from Scottsdale, Ariz.-based Early Warning Services, which provides KEMBA with information about closed and NSF accounts, said Lawrence Reaves, EVP, AFS.

"AFS is the only company that has integrated two of the best check fraud databases into one web interface for tellers," Reaves said.

The integrated service is cheaper to use than the siloed services, Bachman added. That's because Deposit Chek charged KEMBA more than TrueChecks does for the Deposit Chek service. Furthermore, KEMBA no longer has to pay a maintenance fee for the Deposit Chek machine.

In the end, TrueChecks paid for itself in less than two months, Bachman said.

Previously, KEMBA identified closed and NSF accounts by running checks through a separate Deposit Chek machine, Bachman continued. A notable limitation with the siloed Deposit Chek is that the service only verified personal checks, she said.

"Deposit Chek would tell us if the MICR line would be read properly and whether a personal account was closed," she said. "You didn't get any more information about the account. Deposit Chek was missing the counterfeit piece. We didn't have confidence as to whether to take the check or put it on hold."

In the past, tellers would also enter information from a suspicious check into the old TrueChecks system, which would alert KEMBA to fraudulent accounts, routing numbers, people and businesses. Checks were then cashed or placed on hold depending on the separate Deposit Chek and TrueChecks readings.

With the new TrueChecks, the teller enters information from a suspicious check. TrueChecks displays counterfeit information on one screen tab and closed and NSF information on a second tab, Bachman said. "There's no more need for Deposit Chek machines cluttering up the desktop areas behind the teller lines."

The TrueChecks tab alerts KEMBA with a red or yellow warning sign depending on the severity of check fraud risk, Bachman said. "Red means the check is an exact match to a bad account or routing number in the database. There's high probability that the item is fraudulent." Additional information about the item is given in paragraph format.

No More Going 'Overboard'

The Deposit Chek tab tells KEMBA whether the account is closed and gives return information, plus any additional info about the account in paragraph format.

Both tabs allow tellers to quickly report a fraudulent check to the TrueChecks database. "Everything with TrueChecks is Internet-based," said Bachman.

Tellers have honed their ability to address check fraud over the years, in part due to TrueChecks, Bachman suggested. "Before TrueChecks, tellers took a lot of bad checks. Once tellers got hit with a return, it made them afraid to accept checks they weren't familiar with. Then the teller would go overboard with holds and make the member do backbends to show the check cleared."

KEMBA processes about 25,000 checks per month, and catches about five fraudulent items per month through TrueChecks, Bachman estimated.