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March 20, 2024
Banks and their customers continue to be challenged by a rise in fraud and scams across payment types. Most significantly, check fraud has emerged over the past several years as a leading concern. Mail theft, increasingly sophisticated mechanisms for altering paper checks and check images, and coordination problems among financial institutions have led to mounting losses for community banks.
In 2023, ICBA wrote about how community banks can combat the rise of check fraud. In 2024, we noted in a written statement for a Senate Banking Committee hearing that community banks are uniquely positioned to prevent, detect, and mitigate customer fraud. As relationship bankers, community banks know their customers in real and meaningful ways. These relationships help to prevent fraud on the front lines, promote access to fraud prevention services, and give customers a personal resource when they fall victim to scams.
Check fraud is unique among common schemes in that no single party can solve the problem on its own. ICBA supports collaborative, industry-led efforts to combat check fraud:
Federal and state law enforcement agencies should respond aggressively to investigate and prosecute instances of check fraud. The U.S. Postal Inspection Service, for instance, is working hard to stop mail theft at its source.
Financial institutions should work together to share information and communicate openly when customers are affected by check fraud. Several industry groups, including Nacha, maintain directories to facilitate information sharing.
Payment service providers and financial technology companies should continue to develop innovative solutions to help financial institutions prevent check fraud. ICBA’s ThickTECH Accelerator has supported several growth-stage providers of products related to check fraud.
Market forces will also help to limit check fraud over time. As consumers and businesses accelerate the move to electronic payment networks, including the FedNow Service, check volume will continue to decrease. Fewer checks in circulation will naturally lead to fewer opportunities for fraudsters to steal and alter checks.
ICBA is working closely with community banks across the country, as well as with the broader industry, to help address check fraud:
Community bank task force. This month, ICBA kicked off a check fraud task force. The task force is composed of more than 30 community banks and state bankers’ associations, representing the full geographic breadth of ICBA’s membership. Over the coming months, the check fraud task force will work collaboratively to help move the industry forward.
Industry working group. ICBA also leads a fraud working group that brings together regulators, law enforcement agencies, trade associations, and other government stakeholders to share information, identify best practices, and discuss emerging approaches to combatting check and other types of fraud. This group has built a considerable record of success in creating cooperation among entities.
Member education, training, and resources. ICBA is focusing resources on providing ongoing education to its members. ICBA recently hosted a comprehensive webinar on handling check fraud and featured a session on check warranties, indemnities, and exchange rules at ICBA LIVE. ICBA’s advocacy team is working to develop a comprehensive guide for community banks grappling with check fraud.
ICBA will continue to engage with its members to explore different mechanisms for collaborating to prevent, detect, and mitigate fraud. ICBA also values its ongoing work and relationships with members of Congress and federal agencies. ICBA will continue to partner with these important stakeholders as the industry collectively works to reduce the burden of check fraud.
