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Fraudulent Check Scheme: A Growing Concern for Financial Institutions

A recent survey conducted by a leading financial services organization has revealed that fraudulent checks are becoming an increasingly common problem for institutions of all sizes.

Sources of Fraudulent Checks

According to the survey, the most common source of fraudulent checks negotiated at financial institutions is mail theft, accounting for 44% of cases. This is followed closely by:

• Online merchandise transactions (25%)
• Credit and debt reduction/loan relief opportunities (15%)
• Stolen lottery tickets (10%)
• Online lottery transactions (6%)

Where Fraudulent Checks are Negotiated

The survey also found that the majority of fraudulent check schemes are perpetrated from home, with 60% of respondents reporting that the checks were negotiated at a work-from-home address.

Institutional Asset Size vs. Source of Fraudulent Checks

Interestingly, institutions with assets greater than $1 billion reported a slightly different ranking, with stolen credit card information ranking as the second most common source of fraudulent checks, followed by online lottery transactions. Institutions with assets between $250 million and $499 million were more likely to experience fraudulent check schemes perpetrated through online merchandise transactions.

Warning for Financial Institutions

Financial experts are warning financial institutions to be vigilant in monitoring their accounts for suspicious activity and to educate employees on how to identify and report fraudulent checks. “Fraudulent checks can have a significant impact on an institution’s bottom line, not to mention the reputation damage that can occur,” said one expert.

Survey Results

Here is a breakdown of the survey results by institutional asset size:

Ranking of Most Common Sources of Fraudulent Checks

• Mail Theft: 44%
• Online Merchandise Transactions: 25%
• Credit and Debt Reduction/Loan Relief Opportunities: 15%
• Stolen Lottery Tickets: 10%
• Online Lottery Transactions: 6%

Institutional Asset Size vs. Source of Fraudulent Checks

• Institutions with assets greater than $1 billion:
  • Mail Theft: 42%
  • Stolen Credit Card Information: 25%
  • Online Lottery Transactions: 15%
  • Other: 18%
• Institutions with assets between $500 million and $999 million:
  • Mail Theft: 45%
  • Online Merchandise Transactions: 28%
  • Credit and Debt Reduction/Loan Relief Opportunities: 12%
  • Stolen Lottery Tickets: 10%
• Institutions with assets between $250 million and $499 million:
  • Online Merchandise Transactions: 30%
  • Mail Theft: 25%
  • Credit and Debt Reduction/Loan Relief Opportunities: 20%
  • Stolen Lottery Tickets: 15%
• Institutions with assets less than $250 million:
  • Mail Theft: 40%
  • Online Merchandise Transactions: 25%
  • Stolen Lottery Tickets: 15%
  • Other: 20%

The full survey report can be found on the financial services organization’s website.