Drop in Check Volume Doesn't Mean Fraud Will Fall

Even in 2024, US consumers and businesses have an appetite for check payments.

Unfortunately, so do the fraudsters who prey on payment processing gaps. Check volume has been declining, but check fraud is booming. Fortunately, fraud mitigation tools and techniques are available.

When digital payments aren't enabled or accessible, checks are a good alternative. The 2023 Small Business Credit Survey found that "Firms are more likely to accept checks than any other form of payment-even cash or credit cards." Even the US Treasury sends checks-approximately 45 million in 2023 and most during tax season.

But, as we all know, checks are susceptible to fraud. The 2023 AFP^® Payments Fraud and Control Survey finds that "checks continue to be the payment method most vulnerable to fraud, with 63 percent of respondents reporting their organizations faced fraud activity via checks." In 2023, financial institutions reported unprecedented financial loss due to soaring check fraud. One institution reported $135 million in losses and totals in the Americas were near $21 billion, according to Nasdaq's Global Financial Crime Report. Also in 2023, suspicious activity reports filed to report check fraud reached 665,505, about a 90 percent increase over 2021 totals, according to the Financial Crimes Enforcement Network.

Fortunately, we know of a few root causes of current surges in check fraud:

• Mail theft from mailboxes and mail trucks
• Images of checks sold on the dark web that can be manipulated and misdirected with imaging tools
• Fake check ATM deposits

There are also mitigation techniques following these trends:

Specifically for checks stolen out of the mail, the United States Postal Service offers consumers and businesses a daily email previewing mail and packages scheduled to arrive soon. Billers are also encouraging the use of auto-payment options through digital channels.

To mitigate across the threat vectors, financial institutions can preview incoming check images, gaining critical minutes to fight fraud. The FedPayments Reporter for Check enables financial institutions and their customers to see check images before formal presentment to make timely returns to avoid financial loss. And the FedDetect Duplicate Treasury Check Notifier Service gives financial institutions early notice of potential duplicate Treasury checks even with sight of checks deposited at another institution.

Other check processors also offer new technology tools, some built with artificial intelligence and machine learning, to help mitigate fraud. This allows financial institutions to use a combination of tactics to monitor changes and trends with feedback loops about checks moving through their systems. The Treasury just announced it recovered $375 million from check fraud utilizing AI tools.

Don't let declines in check volume catch you off-guard. Criminals continue to innovate, but financial institutions can too, with technology and customer education about what is available to avoid increasing threats.