MADISON, Wis.-Despite increasing usage of online bill-pay and the rise of mobile wallet and P2P payments, one person told Credit Union Journal an old threat remains as big a concern as ever.
Ken Otsuka, senior consultant, risk management for CUNA Mutual Group, said that check fraud is still a major concern for traditional financial institutions, pointing out that it's easier than ever to create fraudulent checks using check-printing software and supplies available at any office supply store. "As long as check-printing software is still available, check fraud will continue to be a severe problem throughout the financial services industry," he said.
That being said, CUNA Mutual doesn't always see check fraud to the extent that it actually exists, because if a loss is less than a CU's deductible, the credit union may not submit the claim to CUNA Mutual.
With the rise in credit union membership as a result of Bank Transfer Day, Otsuka advised extended check holds for new members. "Reg CC allows extended check holds to be placed on new checking accounts for the first 30 days of account opening, so credit unions should certainly take advantage of that," he said. "Even after the new account period expires at the end of 30 days, credit unions should still be thinking 'check holds' until those new accounts become established."
Direct Deposit, Direct Benefit
"It would be nice if all of the fraudsters tried to pass their fraudulent checks within 30 days of opening, but that's not always the case," he continued. Otsuka recommended that CUs use check-fraud prevention tools like DepositCHEK from Early Warning Services or TrueChecks.
One significant clue that an account is legitimate is direct deposit. "That, to me, is a defining moment," said Otsuka. "If a new member gets direct deposit, that tells me they're in it for the long haul. We rarely see those kinds of members try to pass fraudulent checks."