HENDERSON, Nev. (7/2/12)--While check usage steadily decreased between 2009 and 2011, losses associated with check fraud remain a significant cost to financial institutions, individuals and businesses, according to a new white paper from Bluepoint Solutions, a provider of remote deposit capture, item processing and enterprise content-management solutions.
While new electronic payment methods come with built-in mechanisms such as user authentication to minimize fraud, these types of controls are absent with paper checks, according to "Best Practices in Reducing Check Losses." This vulnerability attracts fraudsters who can exploit weaknesses, and consequently has made it the easiest way for fraudsters to target financial institutions.
With an estimated cost to financial institutions of $893 million in 2010 (a drop from $1.024 billion in 2008), checks now closely trail debit cards as the second-largest source of fraud loss to financial institutions.
The three most common types of check fraud are forgeries, counterfeits and return deposit items, each of which account for about 30% of all check fraud losses. The multiple presentment of a single item to multiple institutions for deposit represents an emerging threat to checks. Allowing consumers to retain the original check after depositing it remotely creates a new opportunity for defrauding multiple institutions simultaneously.
The single, most critical best practice in stopping check fraud and reducing losses is to push loss avoidance to the point of presentment. The earlier the potential fraud is identified, the sooner a financial institution can counteract it. This can include a combination of actions, such as notifying depositors at the teller line that they are depositing suspicious checks, applying extended holds or modifying check holds before they are paid or returned by the paying institution.
To download the white paper, use the link.