Here at AFS arming banks and credit unions with the tools to investigate and prevent check fraud is the name of the game. Check fraud is a growing challenge for FIs, despite the modifications in security measures. The risk has also increased due to the new ability of opening bank accounts through the internet and telephone which makes some of the traditional vetting done for account opening tougher. Online and mobile banking increases the challenges FIs face in securing accounts and preventing fraud in numerous ways in fact. Last year, half a million Americans lost an average of $1,200 each through check fraud. Complaints about fake checks to consumer advocacy groups and government agents have almost doubled in the last three years. To help combat these challenges, we’ve compiled a proactive list you can use to investigate check fraud. Make this part of your on-going training with employees – it may help you stop more fraud than last year.
Thanks to technology, counterfeit checks have become almost impossible to spot. Creating authentic looking fake checks with some real data on them can trick even the savviest teller. Here are some ways tellers can investigate check fraud at the front line or in the back office to stop fraudulent checks before they clear.
Every check has a nine-digit routing number, which is the number of the bank the check is drawn from. Forgers mostly change the first two digits that indicate the location of the bank in the 12 Federal Reserve Districts. You should compare these numbers carefully as the forgers buy more time by changing them.
Confirm customer's identification with a state-issued, valid photo ID
The use of expired driver's licenses is a common trend among forgers. Always ensure the information used is current. Also, be sure to get the current address of anyone cashing a check if they are not an account holder at your FI. Having that extra information can help you report fraud if it’s found out later.
MICR line ink
Whereas real magnetic ink may have a shine or gloss sometimes, a fake check will be dull and non-reflective. The banks sorting equipment rejects items that use non-magnetic ink as it is unable to read the MICR line. However, this does not stop the processing of the checks as the banks apply a new magnetic strip. This is because there are many legitimate checks with unreadable MICR lines hence this test is not enough to allow the treatment such checks as fraudulent items. For forgers, it only means it will take additional time to process their checks. This significantly reduces the time available for the bank to return fraudulent checks.
Most companies now use laser printers with MICR capabilities for their checks. These checks are similar to those produced by legitimate printers. Given the presence of micro-perforated edges in these checks, it is almost impossible to detect a fake one.
When investing check fraud, a slight difference in colors may go a long way in detecting a counterfeit item. It may be possible to identify a fake check when fanning through a group of returned checks by color. By looking for checks with two colors of ink on them or with a different color or darkness on the signature separate from the rest of the check, you may be able to spot a forged check.
Compare trends on the account
Often, bad checks will be written in amounts unusual for the typical activity on the account. Training tellers to review the account to see if the check value is unusually high can help them flag the check for further review and could potentially save the FI a lot of money in lost revenue.
With new technology and better printers, forgers are excelling at their craft which makes spotting bad checks at the front line of your FI even harder. Deploy these tips in your training programs to help tellers spot potential problems and of course, run every check that meets your FIs guidelines through TrueChecks® to see if the AFS database has data on that check or account that can help your teller make the right call. We’re here to help.
— written by Advanced Fraud Solutions