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Training, technology helping banks thwart attempted check fraud

A word of caution: attempted check fraud doubled nationwide in 2006, according to a survey by the American Bankers Association (ABA), reaching an estimated $12.2 billion. The Mississippi Bankers Association (MBA) agrees this is a problem, but the good news is that banking systems have methods in place to thwart the would-be malfeasance, and the increase in the actual dollars lost was less dramatic. It was a $969-million loss nationally compared to $677 million in 2003, the last year of the ABA’s survey. Banks’ check fraud prevention systems are credited with keeping actual losses lower than the attempted fraud numbers.

The MBA’s Security Committee works with member banks to make bank employees and customers aware of preventive measures. Committee members interviewed by the Mississippi Business Journal said attempts are up at their banks.

To assist member banks, the MBA hosts an annual security conference, and offers seminars throughout the year for specific training topics. Fraud Net, a shared database, is available to member banks and law enforcement.

“Touch Signature is also a program endorsed by the MBA,” said committee member Cathy Talbot, vice president, corporate security, BancorpSouth, Tupelo. “This program endorses procedures for a fingerprint of non-customer transactions. Occasionally, fraud alerts addressing specific, current scams are distributed to members, too.”

Another member, Robin Vignes, vice president of Biloxi-based The Peoples Bank, pointed out reasons she thinks are causing more attempts.

“The bank has seen so many counterfeit checks presented by our customers that have been a target of the Nigerian scam,” she said. “Fraudulent checks, cashier’s checks and money orders are key elements in many advance fee scams, such as auction/classified listing overpayment, lottery scams and inheritance scams, and can be used in almost any scam when a ‘payment’ is required to gain the victim’s trust.”

She adds that an advance fee is a confidence trick in which the customers are persuaded to advance relatively small sums of money in the hopes of realizing a much larger gain.

“The coastal areas have been hit hard with the scheme since Hurricane Katrina,” she said. “Maybe this is due to people being desperate for money since the storm.”

More money

Another MBA committee member, Mel Channell, director of corporate security at Trustmark Bank, has also seen larger amounts of money involved with attempted fraud. In addition to lottery scams, he attributes some of the increase to scams involving the sale of items over the Internet using sites such as eBay and work-from-home scams.

“All of these scams involve a customer depositing funds into an account and then wiring out or sending money back to an unknown person or company,” he said. “Once the funds are returned, the deposited item will charge back to the customer’s account, leaving the customer responsible for the charged-back item. Customers need to remember the rule of thumb — you don’t get something for nothing.”

Technology: pros and cons

Technology plays an important role in attempted fraud and in preventing it. Talbot said the increased fraud attempts are a result of our times.

“Production of good quality counterfeit currency has always been very expensive and required special equipment and expertise,” she said. “However, technology has made it easy and cheap to produce fraudulent documents, such as checks. Successful check fraud scams can be a very lucrative business for crooks.”

Channell pointed out that fraud detection and signature verification are much more difficult in these times when bankers may not be able to view the actual paper item presented for payment.

“That’s due to the complexity of payment systems and processes,” he said. “Checks can now be turned into ACH transactions, truncated by the merchant (copied and cleared electronically) or turned into an IRD (imaged replacement document).”

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.


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