Check Fraud Numbers Continue to Climb, Says Recent Survey

Business Solutions: Information from the League’s Business Partners

Incidents of check fraud continue to climb, impacting eight in ten financial services organizations (FSOs) and accounting for more than $1 billion in losses.

The trend was noted in the 2009 American Banker’s Association Deposit Account Fraud Survey Report, which tracks fraud trends based on surveys and interviews with FSOs from across the country.

According to the report, there were more than 760,000 check fraud cases in 2008. The number one cause of check fraud loss was returned deposited items, which accounted for 35 percent of total check-fraud losses. Counterfeit checks were the second highest cause of loss — accounting for another 30 percent. Forgeries, which accounted for 22 percent of losses, were the third most common check-fraud type.

The most frequent account type to be victimized was individual checking accounts, which accounted for 74 percent of total check fraud losses. Small business accounts, middle-market and corporate accounts accounted for the other most frequently victimized account types.

The American Banker’s Association (ABA) released its finding in a 181-page report compiled from surveys conducted with 170 small, mid-size and large FSOs from across the country in 2009.

Among the report’s other findings:

  • More than half the FSOs surveyed now offer remote deposit image capture for merchants, which is double the percentage reported in the last ABA check fraud report released in 2006. Only a small percentage of those offering remote deposit capture reported counterfeit, forged or altered items within their RDC systems.
  • Debit card fraud — including signature, pin and ATM transactions — cost the industry $788 million in 2008. Nine in ten FSOs surveyed reported debit card fraud losses, which was up from 3-in-4 FSOs in 2006.
  • Twenty-eight percent of those surveyed reported losses from online transactions. In 2006 only 19 percent suffered online fraud losses.  
  • More than half the FSOs surveyed reported losses due to ACH fraud.

Although the survey showed increases in nearly every area of fraud, there was one important silver lining: the prevention strategies that FSOs are using appear to be making headway. Most attempted check fraud schemes — 91 percent — were caught by the prevention systems or measures before incurring any financial loss to the bank. According to the survey, those preventive tools saved the industry $10 billion in 2008.

Brad Mundine, a regional risk manager for CUNA Mutual Group, said this last statistic is significant. “It shows that the risk mitigation processes and procedures our credit union customers are taking – particularly when it comes to preventing check fraud – are working.”

Mundine added, “Many credit unions mitigate check fraud exposure by using reliable, teller-based fraud detection programs to identify high-risk deposits, as well as tools that provide next day notice of potential returns on deposited items.” Early Warning Services, a CUNA Mutual preferred partner, offers a database of returns and problem accounts that is updated daily by the financial services organizations in the United States.

CUNA Mutual offers its Credit Union Bond policyholders a variety of risk management tools specific to payment fraud, including white papers, webinars, RISK Alerts, and other resources. Visit for more details.

Posted in CUNA.