Wednesday, March 1, 2023

Check Fraud?

 I recently saw a great video by Karen Boyer, Sr. VP of M&T Bank on how to fight check fraud, a topic that I recently addressed.   However, the problem that she addressed was not so much "check fraud" as frauds involving checks.  

I see two different problems here, and faster reversibility is not addressing either. First is stolen legitimate checks deposited to fraudulent accounts. This is a classic "know your customer" problem. This problem is aggravated by the banks' desire for new accounts and initial deposits. One can set up an account, deposit a stolen check to it, and transfer or withdraw the funds, all without ever having gotten close to a bank officer or even a human, non-automated, decision.

The second is alteration, amount or payee, of an otherwise legitimate check before deposit to a fraudulent account. "Know your customer," positive pay, and online banking all apply here. (I no longer have to wait for a statement in the mail to recognize fraudulent activity to my account, as I did seventy years ago when I first began to write checks. I can see it daily.)

All that said, these powerful controls no longer appear to be sufficient. The demand deposit system used to have, and relied upon, controls to ensure that banks only did business with people and institutions from whom they knew they could recover. In the name of popular banking and fast availability of funds, many of those controls have been watered down.  

Ms. Boyer cautions banks to "monitor accounts."  I encourage depositors to use online banking to do the same.  While the depositor is not responsible for fraud, someone has to recognize it, the earlier the better.

When I think up a solution, I will get back to you.

No comments:

Post a Comment