Page 28 - gs250701

Insights and Expertise

Combat check fraud The cost of technology and resources might cause appre-
hension, but compared to potential financial and reputa-
with advanced detection tional losses from fraud threats, the investment is justifi-
able. Solutions should address all types of physical fraud
across channels, and offer functions such as:
technologies 1. Alteration detection: Uses AI "deep learning models"
to compare check attributes and features against poten-
By Todd Robertson tially washed or altered fields, giving institutions a ma-
jor advantage. AI-driven solutions are trained on a large,
ARGO diverse dataset of handwriting samples and can verify
handwriting, particularly in a check's payee and legal
hysical check usage has steadily declined in the amount fields.
digital era, yet check fraud remains a persistent,
costly issue. U.S. financial institutions (FIs) 2. Transaction analysis: Applies tests at account and
P have reported a staggering $1.3 billion (http:// entity levels, measuring such things as account veloc-
bit.ly/4kFxuAh) in check fraud losses, highlighting the ity, account volume, and deposits or withdrawals of un-
severity of the problem. usual amounts.
3. Check stock validation: Lets FIs access presented
According to a recent Federal Reserve survey (http://bit. check images against historical, referenced check imag-
ly/44xeCx4), checks and debit cards account for the highest es, thereby validating consistency and accuracy of check
levels of fraud and losses among all payment types. The stock. Effective software accurately identifies counter-
report found that counterfeits, payee forgeries and check feits in clearing and over-the-counter checks faster and
washing were primary drivers of fraud events in 2024. more reliably than manual visual inspections.
4. Signature verification: Allows FIs to analyze check
Additionally, FIs noted an uptick in perceived physical signatures in detail using machine learning algorithms
forgery, compromised credentials and physical altera- and sophisticated decision trees. This is accomplished
tions. Check fraud is a glaring issue that requires FIs to by comparing digitized signatures to referenced images,
seek additional resources and strategies for detection and managing multiple signatories on the same account, and
mitigation.
monitoring items requiring dual signatures to validate
Fraudsters gaining sophistication check signatures on personal and business accounts.
By focusing on the signing action's dynamic aspects, in-
Fraudsters are increasingly sophisticated, often conduct- cluding signature fragments, handwriting trajectories
ing repetitive, small deposit account transaction fraud at- and geometric analytics, institutions can produce con-
tempts. The size and frequency of these events make them fidence scoring based on these aspects when compar-
difficult for FIs to detect and prevent, especially for insti- ing newly presented check signatures with previously
tutions using legacy systems that fail to keep pace with saved images to determine matching and non-matching
more advanced fraud types. elements.

According to the Fed's survey, counterfeits, washed checks 5. Automated holds: Allows FIs to tailor thresholds and
and payee forgery are the most difficult for FIs to mitigate. levels according to their business rules for: customer in-
Alteration fraud, a popular check fraud method, relies on formation, such as when the relationship was created;
"check washing" to modify checks for a new recipient and relationship based on segmentation; account attributes
larger sum. This can often range from hundreds to thou- such as when the account was opened, number of NSFs,
sands of dollars. average balances, return items, etc.; item analysis, in-
cluding real-time image fraud analysis, for on-us and
Sophisticated fraud calls for sophisticated countermea- transit items; channel variables, including ATM, mobile
sures. Yet many FIs employ outdated systems that are banking and OTC; conductor information; and geoloca-
prone to false positives and misidentifying transactions as tion to identify transaction locations.
suspicious. Thus, FIs spend time and money chasing and
reviewing "good" transactions manually. As check fraud continues and grows more sophisticated,
traditional approaches are becoming obsolete, making
Addressing the fraud problem it crucial for FIs to adopt data-driven solutions that can
quickly and accurately identify and mitigate fraud.
Effectively combating check fraud requires solutions that
implement real-time data to quickly respond to evolv- As ARGO's senior vice president of business development, Todd
ing fraud trends. Initiating fraud prevention at the point Robertson works with the largest financial institutions and healthcare
of disbursement, combined with automated verification providers in the United States to demonstrate how ARGO solutions can
and fraud detection at all points in the clearing process, transform customer experiences and improve operational efficiency.
strengthens an FI's ability to thwart fraud. Contact him via LinkedIn at linkedin.com/in/todd-robertson-038b475.

28