Is Counterfeit Check Fraud Leading DDA Losses at Your Institution?

September 28, 2015

Counterfeit fraud including advanced fee fraud, also commonly known as 419 Scams, utilizes confidence tricks to successfully scam vulnerable individuals. In 2013, the American Bankers Association (ABA) identified that financial industry loss and loss avoidance due to DDA fraud cost over $14 billion. Of the $648 million of all check fraud losses reported, 24 percent was a result of counterfeit fraud (approx. $155 million). And, over the last few years, counterfeit fraud has consistently been the leading DDA fraud type, increasing in losses per account to $0.41 across financial institutions (FI) by the end of 2013.

With advanced fee fraud, fraudsters initially work to gain an individual’s confidence, building his or her trust, and then ultimately defrauding the individual of both money and sense of security. Typically the fraud involves the suggestion of an “opportunity” to gain wealth, romance, employment, support for a cause, or prevention of trouble and hardship for another individual. The victim is tricked into providing money with a promise of a sizeable payout in return. Without a new way of addressing this type of fraud, losses due to counterfeit checks will likely continue to lead DDA fraud loss categories.

Internal FI strategies leveraged to detect anomalous deposit activity are limited in their ability to quickly and accurately identify counterfeit item risk and can result in high false positive ratios. Early Warning recognized the limitations faced by FIs in trying to reduce counterfeit item fraud. With that recognition and the mission to mitigate fraud in the financial system, the company’s collaborative industry model has been coupled with data technology innovation to help solve this challenge.

As a result, Early Warning’s Deposit Chek® Service, the DDA account fraud mitigation industry mainstay, has been enhanced with counterfeit check detection.

The Deposit Chek Service with Counterfeit Notification solution allows FIs to gain broader industry insight to better determine the likelihood that an item is counterfeit, employ preventative measures in the decisioning process to reduce bank losses, as well as customer hardship. This solution improves customer experience and allows for more strategic funds availability decisions. In addition, this most recent enhancement detects both transit and inclearing items to ensure the highest risk of detection prevention.

For more information on how your institution can reduce losses due to counterfeit items, download the solution brief.

About the Author: David Barnhardt is Early Warning’s Vice President of Product Management where he is focused on developing deposits and payments solutions. Barnhardt joined Early Warning in 2014 bringing with him thirteen years of executive experience in bank fraud and risk management. During his career he has done extensive work in mitigating deposit, debit, e-commerce, and internal fraud. Barnhardt also does significant work in link analysis and collusive ring investigation.

iABA Deposit Account Fraud Survey Report – 2013 Edition
iiAmerican Bankers Association –

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