Rates of check fraud are increasing. Check Fraud Defender, a premier AI-powered and cloud-hosted consortium, works to combat this rise in fraud.
A growing problem for banks
Paul Benda, SVP of Operational Risk and Cyber Security at the American Bankers Association (ABA) has called it “a big problem that’s getting worse”.
Robin Pugh, President and CEO of cyber intelligence research company, DarkTower, has also sounded the alert. “The rise of nefarious activities,” she observes, “has led to a proliferation of sensitive information being shared on criminal marketplaces and has increased the amount of identity theft and fraud taking place.”
84% year-over-year rise
In 2022, banks saw an 84% increase in check fraud. That’s according to the Financial Crimes Enforcement Network (FinCEN), a specialist unit of the US Treasury Department. FinCEN found that while 250,000 check fraud cases were reported in 2021, by 2022, this number had ballooned to more than 460,000. That huge leap is in spite of paper check usage declining for decades. So, what’s going on?
There may be a simple explanation for the re-emergence of such an old type of fraud, says Mitek’s Mike Diamond: "Fraudsters follow the path of least resistance,” he says, adding that, “in the U.S., EMV chips in most people's payment cards have reduced, to a great extent, the problem of card-present [fraud]. As a result, fraudsters have gone back to focusing on checks."
Checks contain a lot of information, which means they are prime targets for criminals seeking ways to forge or steal payment methods and despite the increase in electronic payment, they remain the most popular form of payment between businesses.
Underground channels
But, there is another factor at play which has combined to produce attempted check fraud rates estimated to be in excess of $15BN annually: easier networking among criminals.
Criminals have been able to profit from an explosion in the number of digital channels and platforms such as Telegram, Facebook, WhatsApp and TikTok, where they can share images of checks and even ‘how to’ guides aimed at aspiring fraudsters. These platforms, many of which offer the lure of encrypted messaging, have inadvertently provided fraudsters with easy access to new ‘underground’ channels.
Q6 Cyber, which monitors e-crime, has been able to detect at least 30 Telegram channels alone dedicated to providing the latest tips and techniques on how to commit bank fraud. It is thanks, in part, to such easily accessible information and pathways to crime, that check fraud has been so hard to stamp out.
“Our estimate is that check fraud will likely hit its highest point in recorded history when numbers are finally released [in 2024]…” says Frank McKenna, Chief Fraud Strategist at PointPredictive, “$24 billion or more for the year.”
Fighting back
Far from being a problem that is fading away, check fraud is evolving. That means to effectively fight back, banks need a solution that doesn’t stand still but evolves with the challenges.
How does Check Fraud Defender work?
Check Fraud Defender from Mitek is designed to meet these evolving threats.
Using deep computational visual analysis, Check Fraud Defender can analyze checks from any channel – ATM, in-branch deposit or mobile deposit – allowing your institution to stay ahead of fraudsters, whatever pathway they target. Check Fraud Defender’s secure cloud-hosted environment uses patented computer vision technology and AI to analyze more than 20 unique check features, enabling banks to detect forgeries and process checks with greater accuracy and efficiency.
In addition to this, Mitek’s partnership with cyber threat researchers, DarkTower, now provides all customers of Mitek’s Check Fraud Defender real-time access to data about compromised accounts. Mitek uses DarkTower’s proprietary sourcing technology and its own state of the art image analysis technology to extract data from stolen documents such as checks, account screens, and identification documents sold on online channels and in marketplaces. This allows Mitek to deliver automated alerts for potentially compromised accounts to financial institutions and empowering them to conduct victim searches in the MiVIP dashboard.
Experts in checks, experts in fighting check fraud
Backed by more than 35 years of expertise in digital image capture, mobile deposit, and identity solutions, Mitek’s Check Fraud Defender detects forgeries and fraudulent activity missed by other check fraud tools.