Four Steps to Better Check Fraud Protection

Risk mitigation tactics you’ll want to consider

Jun  17 
Beverly Nichols  Product Director, Deposit Solutions 

Check fraud is a persistent threat faced by financial institutions and their accountholders, and the pressure to mitigate check risk to reduce losses is ongoing. Fraudsters are more sophisticated and determined than ever before, using new tools and technologies that challenge the banking system every day.

Even in the current digital banking environment – perhaps especially – better check fraud protection is needed to safeguard both the accountholder and the financial institution. America’s bankers certainly agree. In a recent survey, 66% of financial institution respondents said that checks continue to be the payment method most impacted by fraud.

Without a robust risk mitigation plan that includes real-time tools to stop fraud at the time of presentment, financial institutions will continue to be vulnerable to fraudulent activity.

The good news: There is technology available right now that financial institutions can use to combat check fraud, such as the risk mitigation products available in Deposit Solutions from Fiserv. To manage check risk, your institution should employ solutions that support the following tactics to reduce fraudulent activity:

  1. Set Deposit Limits
    Establishing intelligent deposit limits for deposit accounts can reduce risk for your financial institution, while rewarding good accountholders with higher deposit limits. Use historical data from your account processing system to calculate risk scores for each account and determine automated deposit limit values. You’ll achieve consistency across depositors and be able to offer higher limits to your most valued accountholders, while managing risk and ensuring compliance.

  2. Perform Check Image Analysis
    Deploy risk analysis and scoring methods using software tools that can identify and ultimately stop advanced check alterations, forgeries, counterfeits, out-of-pattern transactions and kiting activities. With automated workflows to capture suspect items, along with the use of historical images, you’ll be able to improve efficiency by reducing false positives and false negatives across multiple transaction types and channels.

  3. Use Transaction Analysis
    Identify check fraud activity with an analysis and forecasting engine that uses neural network algorithms to recognize patterns of suspicious activity, such as deposit fraud and check kiting. Through machine learning and the use of historical transaction data from your account processing system, a benchmark is established for each account type and used to identify suspicious, out-of-pattern activity.

  4. Analyze Using Data From Multiple Sources
    You gain substantial fraud-fighting power when your check analysis draws from a robust database of account- and item-level information from thousands of contributing financial institutions, comprised of years of historical data from consumers, processors and third-party sources. A broad data pool will enable faster and more accurate decisions about whether to accept or reject a presented check, or place a hold on the deposit. That will help you stop fraudulent deposits before they have a chance to hit your bottom line.

When implementing these tactics as part of a comprehensive check risk mitigation strategy, you should not only consider fraudulent activity from multiple aspects and deposit channels across your financial institution, but also analyze both the depositor and check-writer components. Additionally, you should choose solutions that are flexible enough to adapt as the risk environment changes. And be assured, it will.