Industrywide, financial institutions are seeing an uptick in synthetic identities, scam activity and check fraud even as digital channel adoption grows.  

In fact, check fraud is expected to reach $24 billion in 2024, according to a Jan. 3 newsletter from Frank McKenna, chief strategist for AI-driven fraud detection platform Point Predictive.

As consumers lean into digital channels and away from traditional payment methods, the dollar amount of check fraud losses still continues to climb. In 1997 check fraud sat at $1 billion and has grown at a mostly steady pace since, peaking at $24 billion in 2023, according to the newsletter.

S&P Global also noted in a Dec. 7 report that, when mortgage fraud is excluded, check fraud makes up one-third of all fraud at depository institutions. 

Check fraud includes fraudsters gaining customer information from checks and the use of stolen checks to find information about financial institution clients through the mail, according to the Office of the Comptroller of the Currency. Check fraud can also include the use of counterfeit checks, altered checks and forged signatures on checks.

Regions Financial Corp., for example, lost $136 million to check fraud between Jan. 1, 2023, and Sept. 30, 2023, according to the S&P report.  

How do financial institutions best combat check fraud? By going digital, Jennifer Ehresman, head of consumer client protection at Bank of America, told Bank Automation News. 

Pushing paperless

To promote safe and secure banking, Bank of America promotes its digital channels, Ehresman said. “We always encourage our clients to enroll in our digital program.” 

“We have seen a tremendous shift to digital payments, which are a safer payment mechanism for our clients,” she said.  

On its digital platform, Bank of America offers a “security meter” that tracks the security of its clients’ accounts, Ehresman said. Clients are notified to take extra security measures, such as using biometrics, two-factor authentication, secure passwords and more, if their accounts are at risk. 

The bank’s digital security center has seen 38.4 million client visits since its launch in September 2021, according to Bank of America’s January Better Money Habits study, which surveyed 1,000 respondents. 

Third-party anti-fraud

In addition to pushing for digital adoption, financial institutions can also integrate third-party, anti-fraud solutions into their platforms. 

Financial crime prevention firm Abrigo, for one, launched its Abrigo Fraud Detection platform on Feb. 1, according to a company release.  

In a pilot program with a U.S.-based bank, the AI-powered Abrigo Fraud Detection platform identified 93% of the bank’s fraudulent check value, a savings of $330,000 in potential fraud losses, according to the release. 

Abrigo Fraud Detection taps into mobile deposit and fraud prevention provider Mitek’s check fraud data, AI and machine learning capabilities to flag fraud, according to the release. 

“Our approach blends AI and rules-based detection, ensuring our customers are equipped with transparency and robust and adaptable fraud prevention systems,” Abrigo Chief Technology Officer Ravi Nemalikanti said in the release. 

Abrigo clients include $4.3 billion Founders Federal Credit Union, $179 million Stark Federal Credit Union and $496 million Four Corners Community Bank, according to the Abrigo website.  

An ongoing threat

Check fraud doesn’t appear to be slowing, Sara Seguin, principal adviser for fraud and identity risk at anti-fraud fintech Alloy, told BAN. 

“We are keeping a close eye on check fraud as it continues to be a challenge, certainly in the U.S.,” she said, noting that institutions must also be aware of in-person fraud at branches.  

A lot of FIs are focused on digital and online channels but “branch fraud will be an area to keep an eye on as usual suspects and fraudsters are more bold,” she said.  

Bank of America’s Ehresman echoed that sentiment, noting, fraudsters often look to traditional payment methods to commit fraud. 

To add a layer of protection, she urges clients to “go digital, set alerts on your account proactively for money movements [and] go paperless.” 

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