Just how serious a problem is check fraud in this country? Well, put it just behind payment card fraud and ahead of phishing. The total losses are staggering, — $5 billion a year, according to the U.S, Secret Service.
The chief of the Secret Service’s financial crimes division calls it “the number one way criminals today are attacking our financial systems.” That means you need to know more about the problem and take steps to protect your checking account.
The statistics are chilling. The 2012 AFP Payments Fraud and Control survey of more than 5,000 corporations received 447 responses. Among the things they had to say:
Checks are the payment type most vulnerable to fraud.
The typical loss for the organizations that reported fraud was $19,200.
85 percent of those responding to the survey say check fraud is a problem.
More than 80 percent of the companies had “best practices” policies in place, but still lost money to fraud because they failed to follow their own policies. Sadly, according the American Banker’s figures, some 60 percent of the fraud incidents involve employees within the business.
American Banking Association’s Deposit Account Fraud survey in 2011 showed a loss totaling $893 million in 2010 among the institutions surveyed. In that year, attempted check fraud against bank deposit accounts amounted to some $11 billion. The figure reflects both actual losses and loss avoidance due to banks’ prevention efforts. Although slightly lower than the $11.4 billion posted in 2008, the figures are still appalling.
The steps banks must take to prevent fraud are costly as well, according to the ABA survey. Four “money center” sized banks said they spent more than $20 million each for fraud-related programs, not including actual losses that slipped through their prevention nets. Regional banks reported losses of a half million to a million, while mid-sized banks reported losses ranging from $R50,000 to $250,000. Community banks averaged $5,000.
It isn’t encouraging to know that the scope of the problem continues to expand. The ABA data show that the per-incidence cost of fraud have doubled in the past six years, even though more individuals and businesses are switching to electronic transfers to pay bills. The actual volume of check use had fallen by 26 percent, but the ill effects of fraud continued to climb. Even with the decline in check use, 80 percent of business-to-business transactions are consummated by check and financial experts say that trend will continue through the foreseeable future. The advantages simply make paying by check preferable.
Your bank is likely to have information about how you can protect your account. They can explain their polices regarding responsibility when fraud occurs. Many check printing companies are stepping up to make checks more fraud-proof. They incorporate such features as safety holograms, multi-dimensional foil seals hot-stamped to check stock. They can’t be photocopied. Chemically sensitive paper, micro-print borders, invisible fluorescent fibers, erasure protection, security screens and warning boxes are all innovative approaches available to businesses to help ensure check safety.
Don’t just look at the statistics and shudder. Take pro-active steps to make sure you don’t join the long lists of fraud victims.
