The Pervasiveness of Check Fraud: Banks Are Paying the Price

Among fraud losses, check fraud ranks the highest within several financial institutions and accounts for 20% of all suspicious activity reports (SARs) filed. Paper checks—containing an abundance of valuable sensitive information—are prime targets for criminals who can easily alter and deposit them or use the information to commit identity fraud. Despite the risks associated with using paper checks and the increase in available digital channels, many individual and small-business consumers still opt to write checks. Most consumers victimized by check fraud tend to fall into a specific category—older, low-income, with little access to digital banking channels, as well as small businesses that still rely on checks for making and receiving payments.

FIs must address the check fraud epidemic. Fraud teams should work collaboratively with commercial and retail banking teams to reach members who fall outside their typical purview for fraud prevention, by expanding how they identify and protect the consumers most likely to be plagued by check fraud. 

This Javelin Strategy & Research report reviews how financial institutions can combat check fraud and build customer trust by more effectively educating consumers about fraud risks and payment options and by collaborating more within their organizations, with other private-sector entities, and with law enforcement. 

Key questions discussed in this report:

• Why is check fraud so prevalent? 
• Does anyone think checks are still a secure payment form? 
• How can FIs help combat consumer check fraud?

Companies Mentioned: 

Abrigo, Chase Bank, Early Warning Services (EWS), Financial Crimes Enforcement Network (FinCEN), Huntington Bank, Mitek, TD Bank, Telegram, TikTok, U.S. Postal Service (USPS), U.S. Postal Inspection Service (USPIS), American Bankers Association (ABA)