Check Fraud - Still Looming Large

by Steve McIlhaney, SVP , Director of Business Development

Despite the many digital payment options and advancements, check fraud continues to surge throughout the US. Check fraud involves tens of thousands of incidents monthly. The losses incurred during the first six months of 2025 exceed $3 Billion!

The bad actors come in all shapes and sizes, but in most cases the activity is driven by organized criminals exploiting gaps in our traditional payment method.

Complicating the issue, financial institutions encounter perceived legal barriers hindering timely info-sharing about fraudulent activities, particularly related to “mule” accounts used by fraudsters to launder large sums. The uncertainty around privacy regulations often causes hesitation, delaying responses and giving fraudsters crucial time to cash compromised checks.

However, organizations like NACHA and ECCHO, along with many national and local trade associations have established fraud directories to help improve timely communication among financial institutions. Additionally, there is proposed legislation to create a Federal Payments Fraud Task Force, to help bring a coordinated effort to respond to this nationwide threat.

Community FI’s can proactively mitigate these risks by strengthening their internal controls, training both frontline AND back-office staff and by implementing advanced fraud solutions. There are service providers who can significantly enhance detection by quickly identifying suspicious checks at the point of deposit, helping banks prevent fraudulent transactions – before losses. Adopting Positive Pay systems, regularly updating customer education initiatives and enhancing internal communication channels can all reduce vulnerability.

Given the ongoing threat, FI’s must be vigilant. Stay informed, implement proactive measures, and collaborate with your peer FI’s and trade associations.

Information sourced from Kathy Field, Finovifi