As the use of paper checks continues to decline, check fraud is on the rise with criminal gangs becoming more sophisticated. Criminals have been increasingly targeting mailboxes to commit check fraud which usually works in one of two ways either by fraudulently endorsing the check or changing the check through a process known as washing. Washing allows thieves to change the amount of money, and the recipient, then deposit the check with another bank.
Check fraud made up 47% of bank fraud losses in 2018, according to a 2020 survey released by the American Bankers Association (ABA). Theft of checks mailed through the U.S. Postal Service has jumped significantly, almost doubling from 350,000 fraud reports in 2021 to 680,000 in 2022, according to the Financial Crimes Enforcement Network, or FinCEN, part of the Treasury Department.
Despite all the latest technology, it can take several weeks or even months for banks to determine whether a fraud claim is legitimate and if their client will be receiving his or her money back.
Many consumers mistakenly think the Federal Deposit Insurance Corp. (FDIC) protects them against fraud. However it only covers extraordinary cases, such as when a bank fails. Banks can decline to cover a stolen check if a customer takes too long to report it, or if the investigators suspect the consumer was negligent.
The ABA said improved technology and better collaboration between big and small banks can shorten the time period for reimbursement of check fraud victims.
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Source: Wall Street Journal – May 9, 2023
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