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Mobile, ATM Check Deposit Fraud Puts Credit Unions At Risk

Accurate, current data with real-time alerts is key to addressing fraud risk through today’s deposit channels.

More U.S. consumers than ever are swiping and tapping to check their bank account balance, to transfer money or deposit a check. The result has been a mobile banking boom. To keep up with demand, credit unions have been fast to develop their own apps and mobile-friendly services, including enhancing ATMs with the latest check deposit imaging capabilities.

As with any new payment technology, fraud is quick to find new opportunities and loopholes. In the case of check fraud, not only has it stuck around, it’s evolved to take advantage of these newer remote deposit capture (RDC) channels. According to the Association for Financial Professionals’ 2019 AFP Payments Fraud and Control Survey, which surveyed over 600 treasury and finance participants, checks continue to be the subject of more fraud than any other payment method, with 74% of respondents reporting this form of attack.

The reason check fraud remains so relevant is because of how easy and effective it is to perpetrate. For example, a scam involving RDC could be as simple as a duplicate deposit scam. In this example, a remote deposit is made via mobile device, then the same check is walked into a bank and cashed. Credit unions who don’t have the bandwidth to audit every check (instead choosing to prioritize only high-value items), or validate checks in real time or via a comprehensive database, are at serious risk of being defrauded.

According to a new white paper from Advanced Fraud Solutions (AFS), to mitigate check fraud across all deposit channels, credit unions should consider the following best practices:

  • Have accurate, current data with real-time updates to your remote capture system. Up-to-the-minute data updates provide a clear, real-time picture of whether the account has a history of fraudulent activity at the time of the mobile transaction. Providing visibility with accurate, real-time data from historical transactions removes any fuzziness about the validity of the mobile deposit. The system you use must be able to provide a real-time data feed that includes counterfeit, NSF, Closed Account, Duplicate, and other fraudulent items.
  • Have a real-time alerting system in place that can validate an exception hold. Accurate, real-time visibility on the probability of a fraudulent remote capture provides the intelligence needed to validate an exception hold. Having the data in your remote capture system is a great start but you need an alerting system that reinforces the reason your institution puts a hold on a deposit.
  • Be sure your real-time alerting systems comes with data aggregation and automation. Real-time alerts for your fraud team starts with workflow automation. But you must first implement a system that consolidates data from multiple mobile-deposit capture and check image processing platforms. Data aggregation with fraud visibility provides a mechanism for your fraud team to detect, in real time, the validity of a mobile deposit.
  • Take a proactive stand against mobile deposit fraud with better data and visibility. Data quality should be at the heart of your remote capture fraud system if you are going to minimize remote capture fraud. The mobile scammer who is trying to stay a step ahead of your fraud team is hitting multiple FIs in a single morning or afternoon. Most FIs do not have a full understanding of their remote deposit risk because they don’t have the data to give them the visibility to see the magnitude of the problem, resulting in an inability to fight what they cannot see. Real-time updates to your backend database with alerting functions for your fraud team are critical to taking a proactive stand against remote capture fraud.

To learn more about AFS’s real-time check fraud prevention solution, visit www.advancedfraudsolutions.com/truechecks.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
June 24, 2019

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