Check Frauds

 

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The Fraud

The major perpetrators of check frauds in the U.S. are foreign crime organizations, mainly from Nigeria and Russia, as a sideline to drug trafficking. They have been known to use all the tricks we discussed in our employee check tampering discussion, such as washing, altered payees, forged maker, and forged endorsements using stolen canceled or uncanceled checks.

Canceled checks make fine templates for creating new check forgeries, right down to a company logo, precise routing numbers, font matching, colors and watermarks. With the aqdvent of the Check 21 system it was thought that these problems would be minimized but, due to the innovative nature of crooks and the rapid evolution of technology, check image fraud is still rampant.....simply in a different form.

The Flaw

You need only visit your friendly neighborhood office supply store to find the cause of many check frauds. For a small investment, one can buy a nice laser printer/scanner/copier, some good check stock paper, magnetic ink cartridges, an encoder and high quality MICR fonts. Voila! You are in the check-forging business.

Don't permit a new customer (most likely with false ID) to open an account by depositing a third-party check and then drawing a portion of it in cash immediately. . . or tap the balance with an ATM card before the phony deposit is uncovered. This is an inherent payment system fraud threat in remote deposit capture and wire transfer transactions.

The permutations are endless.

The Fix

Educate employees on how to recognize phony checks, how to insist on valid IDs, and how to examine and verify them. Know your customers! Have strict policies and strictly enforce them. Keep your technology tools up to date. If you scrimp on this facet of operations you leave yourself open to exploitation by better equipped fraudsters.