Playing Cat and Mouse with Forged Checks

You could forge your own checks with desktop techniques and chemical alteration strategies. You could also take the simple steps of one Mr. Neil who created a few bogus companies, signed a few checks, and robbed the Deerfield Bank of $63000.

On a more dismal note, others could do the same to you. You could receive a cashier’s check or money order, deposit it in your bank account, and have the depository bank deduct the equivalent amount from your account because the check was found to be counterfeit.

rectangle_webBank regulators report such situations on a daily basis and estimate that check fraud is on the increase. Two years ago, more than half of organizations (52%) reported that they experienced check fraud. Ernst and Young discovered that 500 million checks are forged annually with losses resulting in more than $10 billion per year. American Banker, an industry banker’s magazine, estimates that losses from check fraud will grow by 2.5% annually in the coming years.

Moreover, fraudsters also take advantage of the amount of time it takes for a check to clear. In the case of fraud check, clearance takes even longer. All of this plays to the fraudsters advantage and to your disadvantage. What to do?

The 2014 Federal Reserve’s Payments Fraud Survey — Consolidated Results advises banks to adopt two umbrella strategies:

1. Educate Customers
The Federal Trade Commission has made this easy by printing a leaflet called giving the Bounce to Counterfeit Check Scams that banks can distribute to their clients. The brochure provides some of the following facts:

a. It teaches you how to recognize a forged check or money order.

b. It explains why you are penalized for depositing a counterfeit check.

c. It urges caution when dealing with new buyers particularly if the buyer lives outside of the United States. Red flags include seller offering payment in excess of your asking price before asking you to wire back overpayment.

d. It suggests that you use Internet payment services such as PayPal to have customer remit payment.

2. Educate Employees
Tellers should be particularly educated as to the risks. Here again, the Federal Reserve has issued a booklet called Check Fraud which discusses check fraud issues and adopting electronic check presentment. It suggests the following:

a. The bank could conduct an educational campaign

b. It should include its wire department in this campaign and train employees to recognize suspicious transactions. These include some, or all, of the following: a deposit made within weeks before the requested wire transfer; a customer who rarely makes wire transfers; and a wire transfer recipient outside the United States.

c. Teach employees how to apprise customers of the risks.

The Consumer Advisory Council has been playing around for some time with promoting forms of electronic payment systems such as the Check 21. This may hinder others and you from forging checks or from other such fraudulent schemes. In the meantime, all banks and you really can do is educate employees and yourself on mitigating the financial impact of these scams.

For further information, please contact the Federal Reserve Bank of Chicago at (312) 322-5322 or https://www.chicagofed.org/utilities/contactus

Leah Zitter, dbfchicago.com Writer