Check fraud continues to plague financial institutions, and it leads to significant losses every year. Check image analysis helps to reduce the risk of check fraud by using software to automatically scan checks for signs of fraud such as alterations and forgeries. This guide provides an overview of check image analysis, and it contains links to resources with more information.
Check image analysis scans checks for signs of fraud. It uses software to assess fixed elements such as the payer’s name and address, the placement of lines, fonts, layout, serial number, and check size. It also looks at the content of the check including the date, legal and courtesy amounts, and the signature. Check image analysis looks for counterfeit checks, forged checks, and altered checks.
Check image analysis software works by scanning checks and looking for potential signs of fraud. In particular, these tools look for minute issues that cannot be seen by the human eye, and they examine both static and dynamic elements of the check. When the software detects a check that appears to be fraudulent, it requests a manual review from your fraud team.
The software shows your team a copy of the check that has been presented. If it is an on-us check, the software also shows the presented check along with a copy of a reference check and signature. Check out the following resources to learn more about how this software works:
When scanning checks for signs of fraud, image analysis software looks at the stock and content of the check. Stock includes all of the preprinted information on the check, and content refers to the information that has been written on the check.
Signature verification tools analyze check signatures for signs of forgery. They compare the size and shape of the presented signature with a reference signature, but they also assess elements such as fluidity, speed, and pressure
Your employees can spot an altered check by looking for inconsistent handwriting or visible signs of erasure. However, many alterations are too small for the human eye to detect. To ensure you don’t miss anything, you need to use check image analysis.
Check image analysis tools ensure that checks meet the image exchange requirements of the Check 21 Act. These tools help to preserve the integrity of your check images. They can also identify low-quality images and thus help your financial institution avoid the costs associated with researching payment details on low-quality check images.
Abbreviated as Check 21, the Check Clearing for the 21st Century Act allows banks to process check information electronically and send substitute checks to banks that prefer paper checks. This law allows banks to avoid the time and effort involved in sending physical checks to other banks. Instead, they can capture a photo of the front and back of the check and send that along with payment details.
Check image analysis tools work to reduce your bank’s risk of check fraud. Although check use has declined over the last couple of decades, check fraud continues to be rampant. Unfortunately, as financial institutions tighten security on other types of payment methods, fraudsters often return to check fraud.
Here are the different types of check fraud that you can fight with check image analysis:
- Check washing — Thieves wash off the written payment information and write the checks for larger amounts of money.
- Counterfeit checks — This refers to any check that has been created or altered for the purpose of stealing funds from a victim’s bank account.
- Check kiting — A thief deposits a bad check into their account and then withdraws the funds. This type of fraud relies on float time, and it can be a continuous process or a one-time effort.
- Forged checks — Someone writes a check to themselves of another entity, and they forge the account holder’s signature.
- Check fraud with account takeover — A fraudster takes over a victim’s account. Then, they have the bank send them a book of checks and they write checks from the account.
- Check fraud with identity theft — A criminal steals a victim’s identity, and then, they open an account and write bad checks from it.
- Check fraud on a new account — Someone opens an account using their own identity or a stolen identity. Then, they write multiple bad checks and abandon the account once it has a large negative balance.
Check image analysis can help you spot the types of check fraud noted above. It can also help your bank detect other types of check fraud including fake paycheck scams, fraudulent lottery checks, and money order fraud.
Image analysis is critical, but it shouldn’t be the only strategy that you use to fight check fraud. You may also want to bolster your checks against fraud using barcodes or ultraviolet technology or by offering options such as Payee Positive Pay to your commercial clients. Signature verification tools, behavioral analysis, and customer education can also help to reduce the risk of check fraud at your bank.
Check fraud can directly harm your bank by creating financial losses, but unfortunately, that’s not the full extent of the damage. Check fraud can also damage your relationship with your customers and hurt your bank’s reputation.
Since the invention of the check, bankers have always looked for strategies to spot fraudulent checks. In the early years, they relied on manual detection, and then, they started using reader sorters to speed up the process. Eventually, the industry developed tools that could analyze MICR data to analyze transactions.
Unfortunately, although this technology is several decades old, many banks still rely on MICR analysis or other legacy tools to detect check fraud. Real-time automated check image analysis offers more speed and accuracy than these legacy solutions. Unlike bulky legacy equipment, it also doesn’t take up unnecessary space in your branch.
Image Analysis for Mobile Remote Capture
Mobile remote capture gives your customers the convenience to deposit checks on the go, but if not managed correctly, it can also create openings for fraudsters. If a fraudster deposits a bad check using their mobile device, they can easily remove the funds from the account before you realize that the check is bad.
To prevent this from happening, you need image analysis tools that work in real-time. They can compare the deposited check to previously deposited checks or reference data. Then, if there’s a potential issue, they can flag the transaction as fraudulent.
Contact Us About Check Image Analysis
You need to be proactive about protecting your bank and your customers from check fraud, and our check image analysis tools can help. Ready to learn more? Then, contact us at SQN Banking Systems today.