The Problem We Solve
The annual costs of fraudulent electronic transaction attempts - such as ACH and PIN-less debit card transactions - are steadily rising. So even if you reviewed every check, your financial institution would remain vulnerable.
In addition, the payment review and approval methods used by most financial institutions pose critical security issues. Their selective examination of check signatures is too subjective, too random, and largely ineffective.
Bulk filing and staffing limitations have inherent limitations. And most transactions are authorized by default and are never physically examined.
Finally, recent advances in fraud protection primarily target paper check-stock - qualities that are useless after the item has been accepted by a teller or merchant - and they don't address electronic transactions.
Requirements for Addressing Transaction Fraud
The source of many operational losses from fraud can be tracked back to specific entry points and types of payments. Therefore, risk prevention efforts should target these areas for additional security analysis and reviews. The following are examples of sources and types of fraud facing financial institutions today:
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- MICR-Based Items: Inclearings from paper-based checks, IRDs and drafts received from external sources and institutions normally have 24 hours to pay or return fraudulent items.
- Counterfeit Checks: Due to the availability of check printing software, MICR ink, and check stock, it has become very difficult to identify a bogus item in time for return or dishonor.
- Forgeries: Signature verification is a subjective security method and the ability for criminals to scan and paste actual signatures make it even tougher to detect a forged or copied signature.
- Check Washing: Chemicals are readily available that will remove the payees name without showing any alteration and allow a new payee's name to be written on the item.
- Unauthorized Drafts: Paper drafts have grown and institutions have not established methods to confirm the authorization by the accountholder.
- ACH Items (including Check Conversions): ACH transactions are growing at phenomenal rates and represent a new risk that must be included in fraud reviews.
- Debit Card "Non-PINed" Items: These transactions represent a greater threat since they may be used for Internet or other unsupervised payments.
- Unauthorized ACH debits: Only consumer accounts have the 60-day right to return unauthorized transactions, so the financial institution needs to confirm the authorization of ACH debits.
- New Account Frauds: Historically the new account represents a greater risk for fraud.
- High-Risk Account Monitoring: Certain accounts represent a greater risk due to the amount of money that can be lost from unauthorized payments.
- Disreputable ACH Originators: Certain ACH originators have shown a pattern of debiting accounts without proper authorization and should automatically be blocked from charging any account.
- Teller Cashed Checks: Counterfeit cashier's checks sent to legitimate account holders that are requested to cash, with a portion back to the crook are increasingly common. There needs to be a way to verify if the item has been reported as a counterfeit suspect prior to accepting or cashing.