Return Items, Counterfeits, Forgeries and Other Types of Fraud Continue To Be a Problem

The payments landscape is changing at an ever-increasing velocity. Newer payment methods, such as those provided by Bluepoint Solutions, come with user authentication and staff review mechanisms built in. These and other controls help reduce the risk and occurrence of losses due to fraud. Unfortunately, there are no such safeguards with paper checks—a vulnerability that attracts fraudsters and make it easy for them to target specific financial institutions.

The three most common types of check fraud are forgeries, counterfeits, and return deposit items. Each of these accounts for approximately 30% of all check fraud losses. Often, this takes the form of a single item being presented to multiple institutions for deposit. And the popularity of remote deposit technology allows a depositor to retain the original check after depositing it, which creates a new opportunity for defrauding multiple institutions simultaneously.

Many credit unions lack the ability to detect duplicates either at the point of capture, wherever that is, or while it is inclearing. This double vulnerability is especially a threat to any institution that offers remote deposit capture—fraudsters can now defraud an institution without ever walking into a branch.

To those intent on committing fraud, checks now represent the lowest-hanging fruit. It is easier to manipulate a paper check with a false MICR line or payee information, to alter a dollar amount, or to steal a check or an image of a check, than it is to hack into other more secure systems fortified with high-tech safeguards.

This white paper examines the true cost to financial institutions of various types of fraud, and discusses the latest, best practices to identify and prevent losses.

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