Core Banking in the US: Balancing Legacy and Innovation
Leveraging
Technology in the Fight Against Check Fraud
Empowering Compliance Officers: Making Compliance
Easier with AI-Powered Support
Finovation Focus
Navigating the Landscape of Modern Banking
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Editor Note
Russell Taylor
Welcome to Finovation Focus, a magazine designed to navigate and illuminate the rapidly changing world of banking and financial technology. At Finovofi, our mission is to empower community financial institutions—banks and credit unions—through leading-edge technology tailored to their unique needs. In a digital age rife with opportunity and challenge, we’re here to equip your institution with robust, AI-driven tools to combat fraud, streamline compliance, and optimize core processing functions.
Our journey at Finovofi began with a clear purpose: to support financial institutions in delivering safe, efficient, and innovative services. Fraud and compliance demands are intensifying across the industry, especially for community institutions. Our solutions, like Finovofi FraudSentry, empower these institutions with advanced capabilities typically reserved for much larger entities, leveling the playing field and reinforcing trust within their communities.
As you explore this issue, we hope you’ll gain insights into strategies and technologies that can transform your institution’s approach to challenges like check fraud, compliance complexity, and core system modernization. Finovofi is committed to standing beside our clients, providing forward-thinking solutions in an ever-evolving financial landscape. Thank you for joining us on this journey, and here’s to a future of secure, smart banking.
Core Banking in the US: Balancing Legacy and Innovation
By Russell Taylor
In the heart of America’s financial sector, a quiet revolution is unfolding. U.S. banks are caught in a delicate dance between the reliable but aging legacy systems that have long been their backbone and the siren call of cutting-edge technology—particularly Artificial Intelligence (AI)—promising enhanced efficiency, precision, and customer satisfaction.
The Legacy Conundrum: Picture a bank’s core system as the engine of a classic car— reliable, but increasingly difficult to maintain and upgrade. Many U.S. financial institutions find themselves in this predicament, running on systems that were cutting-edge when bell-bottoms were in fashion. These legacy systems, often coded in languages that today’s developers might view as ancient hieroglyphs, hinder innovation and agility.
For smaller community banks, the situation is even more precarious. They often rely on industry giants like FIS, Fiserv, and Jack Henry—vendors whose primary focus is the needs of larger institutions. These smaller players can feel as if they’re trying to fit into a suit two sizes too big, leaving little room for tailored innovation.
Modernization: A Cautious Tango: Rather than attempting a complete overhaul—akin to swapping out the engine of a moving car— many banks are opting for a more nuanced approach. They’re building sleek, modern interfaces atop their trusted but aging core systems. It’s like adding a touchscreen to that classic car: you get some new features without the risk of a complete breakdown.
AI’s Role in Modernization: AI is playing an increasingly vital role in bridging this gap. Intelligent automation tools can extend the life of legacy systems by optimizing processes, predicting maintenance needs, and enabling smarter integrations with modern solutions. These tools allow banks to innovate without the immediate need for a costly system replacement.
Cloud computing has also emerged as a key dance partner in this modernization waltz. Banks are increasingly moving systems to the cloud or adopting hybrid models, seeking the scalability, costefficiency, and AI-driven insights that cloud solutions enable.
The Regulatory Two-Step: No discussion of banking technology would be complete without mentioning the everpresent dance partner: regulation. U.S. banks must navigate a complex regulatory landscape that often feels like trying to tango while avoiding stepping on your partner’s toes.
AI’s Role in Compliance: AI-powered tools are revolutionizing regulatory compliance by analyzing vast amounts of data to identify risks, detect anomalies, and ensure adherence to evolving regulations. These systems enable banks to stay ahead of the curve while reducing
burdens.
Open Banking: The New Choreography: While the U.S. hasn’t formally adopted open banking regulations like Europe, market forces are pushing banks to embrace more open, API-driven architectures. This shift is creating new possibilities for partnerships and innovations, much like a dance floor opening up to allow for more creative moves.
AI-Enhanced Open Banking: AI is unlocking the potential of open banking by enabling real-time data sharing, personalized financial recommendations, and enhanced security protocols. Through predictive analytics, banks can better understand customer needs, offering tailored services that strengthen relationships and build loyalty.
The New Kids on the Dance Floor: Enter the challenger banks and digital-only institutions. These nimble newcomers, unencumbered by legacy systems, are showing up to the party with fresh moves that are catching the eye of customers. Traditional banks are feeling the pressure to keep up or risk being left behind.
A Modular Future: To stay in step with rapid changes, many banks are moving toward modular core banking architectures. This approach allows them to update or replace individual components without disrupting the entire system—like changing your dance shoes mid-performance without missing a beat.
AI-Driven Modularity: AI is central to this modular transformation, enabling predictive system updates,
real-time adaptability, and seamless integration of new technologies.
Small Banks, Big Moves: Interestingly, smaller banks and credit unions often lead the charge in adopting cloudnative strategies. Less weighed down by legacy systems, they’re more likely to embrace Banking-as-a-Service platforms, extending their reach without breaking the bank.
The Real-Time Revolution: The push for real-time payments, driven by initiatives like the Federal Reserve’s FedNow system, is adding urgency to the modernization dance. Legacy systems often struggle with the quick steps required for real-time transactions, making upgrades a necessity rather than a luxury.
AI for Real-Time Payments: AI plays a pivotal role here by detecting and preventing fraud in real time, optimizing payment flows, and ensuring seamless transaction processing.
Personalization: The Customer is King: In this new era, the customer takes center stage. Banks are restructuring their systems to offer personalized services, products, and insights. It’s like having a dance instructor who knows your every move and can anticipate your next step.
AI-Driven Personalization: AI algorithms analyze customer data to deliver hyperpersonalized experiences, from tailored financial advice to customized product offerings, creating deeper engagement and trust.
Tech-Powered Innovations: Artificial intelligence, machine learning, and blockchain are no
longer just buzzwords—they are becoming integral parts of the core banking choreography. From fraud detection and risk management to customer service chatbots and predictive analytics, these technologies are helping banks perform more complex routines with greater precision and confidence.
Partnering Up: Many traditional banks are realizing they don’t have to go it alone on the dance floor. By partnering with fintech firms, they can access new capabilities and enhance their performance, creating a more dynamic and exciting show for their customers.
AI as the Bridge: These partnerships often center around AI-driven solutions, enabling faster integration of innovative technologies and enhancing banks’ ability to adapt to changing customer demands.
The Grand Finale: As the U.S. core banking landscape continues to evolve, one thing is clear: the most successful players will be those who can master the intricate dance between preserving the stability of legacy systems and embracing the agility of modern technologies like AI. It’s a complex performance, but one that promises to reshape the future of banking in America.
This AI-powered transformation is more than just a technological upgrade—it’s a reimagining of how banks interact with their customers, streamline operations, and remain competitive in an ever-changing financial landscape. The dance continues, and those who embrace AI as their trusted partner will lead the way into a new era of banking.
Leveraging Technology in the Fight Against Check Fraud
By Starr Largin
Despite the steady decline in the use of paper checks, check fraud incidents surged by 70% in 2023, costing financial institutions millions and underscoring the critical need for advanced fraud prevention technology. Fraudsters continue to innovate, employing methods like check washing, counterfeiting, and forgery. As criminals find new ways to exploit vulnerabilities, financial institutions must stay vigilant and adapt their strategies accordingly.
The Evolution of Check Fraud
Historically, check fraud involved physically stealing checkbooks and issuing fraudulent checks. Today, however, criminals use technology to make fraud more efficient and widespread. From printing counterfeit checks at home to purchasing stolen checks on the dark web, the tactics used are increasingly sophisticated. Techniques like check washing, once performed with products like “WhiteOut,” now involve chemicals such as nail polish remover and bleach to remove ink without damaging the check’s integrity.
This shift means fraudsters no longer need to steal checks from mailboxes; they can buy and alter them online, reducing their risk of being caught. The ease with which criminals access and manipulate checks emphasizes the importance of financial institutions leveraging advanced technologies to safeguard their operations.
The Role of Technology in Check Fraud Detection
As fraud tactics evolve, so must the methods used to combat them. Technology offers a range of solutions for detecting and preventing check fraud,
helping financial institutions stay one step ahead. Key areas of focus include:
01 Implementing a Layered Defense Approach
Financial institutions need a comprehensive, multi-layered defense strategy. This includes integrating advanced technologies into existing systems to monitor and detect suspicious activities efficiently. The primary components include:
• Transaction Analysis: Using data analytics to identify unusual or suspicious
activity,such as out-of-range check numbers or duplicate entries. Integrating “Know Your Customer” (KYC) practices ensures transactions align with typical account behavior, minimizing the risk of fraud going undetected.
• Check Stock Validation: Advanced image analysis technologies can validate the authenticity of check stock, comparing it against historical records to detect discrepancies such as altered logos, fonts, or minor changes like phone numbers. This method reduces false positives and provides a thorough check for counterfeits.
• Automated Signature Verification: Traditional manual signature verification is unreliable as signatures change over time. Machine learning algorithms provide a more accurate analysis by using AI and deep learning to compare signatures, improving detection rates.
02 Detecting & Preventing Check Fraud
Detecting check washing requires cutting-edge
technology to spot tampering that the human eye may miss. Key solutions include:
• Image Analysis Software: Analyzes check images for signs of alterations.
• High-Resolution Scanners with OCR Technology: Captures detailed images for automated comparison and verification of text and numeric data.
• Data Analytics and Fraud Detection Algorithms: Processes large volumes of transaction data to identify patterns or anomalies associated with check washing, enabling proactive fraud prevention.
03
AI-Driven Check Fraud Prevention
In the modern banking landscape, AI is revolutionizing fraud detection. AI-driven systems analyze vast datasets quickly, identifying irregular patterns indicative of fraud. These systems are continuously learning, refining their algorithms to enhance
predictive accuracy over time. The components of AI-based fraud detection include:
• Data Collection: Gathering information from multiple sources, including teller capture, branch image capture, and remote deposit capture.
• Feature Engineering: Isolating attributes that could indicate fraud, such as unusual transaction locations or amounts.
• Model Training: Training models with historical data to recognize patterns of fraudulent behavior effectively.
• Anomaly Detection: Identifying outliers and deviations from typical transaction behavior using statistical analysis.
• Continuous Learning: Updating vmodels with new data to keep pace with evolving fraud tactics.
By implementing AI, banks can not only detect fraud faster but also prevent it through predictive modeling. AI systems can verify signatures, authenticate checks, and compare transactions to historical behaviors within seconds.
Moving Forward: Building a Stronger Fraud Prevention Strategy
With check fraud on the rise, financial institutions must invest in technology and adapt their strategies to secure their operations. Establishing robust, AI-driven processes is no longer optional; it is a necessity for banks looking to build a successful and resilient defense system against check fraud
Conclusion: The Need for Proactive Measures
The fight against check fraud is a dynamic challenge, but leveraging technology offers financial institutions the best chance to stay ahead. By investing in advanced fraud detection systems and integrating AI-driven solutions,
banks can effectively safeguard their operations and protect their customers. The time to act is now—proactive, tech-driven strategies will be critical to securing a more successful future in the fight against fraud.
Assessing Mail-Theft Related Check Fraud Suspicious Activity Reports (SARs)
Check fraud tied to mail theft is becoming increasingly prevalent, posing a major threat to U.S. financial institutions. In 2022 alone, over 680,000 check fraud-related SARs were filed—a dramatic increase from 350,000 in 2021. The Financial Crimes Enforcement Network (FinCEN) responded by issuing a nationwide alert1 in early 2023, urging banks to monitor mail theft-related check fraud more closely
Understanding SARs in the Context of Check Fraud
According to FinCEN2, SARs are filed by financial institutions to report suspicious or illegal activities as required under the Bank Secrecy Act (BSA). These reports play a critical role in identifying patterns of financial crime. However, SARs are just one data point in the broader picture of check fraud—a growing issue driven by theft and subsequent fraud through the U.S. mail system.
In its alert, FinCEN specifically highlighted the fraudulent negotiation of checks stolen from the mail. This tactic allows criminals to access checks without directly confronting account holders, making it a persistent and challenging threat for banks.
Empowering Compliance Officers: Making Compliance Work Easier with AI-Powered Support
By Todd Winship
In the fast-paced world of banking and finance, compliance officers are the guardians who navigate the intricate maze of regulations. Their role is crucial—ensuring adherence to ever-changing laws, updating internal policies, and providing essential training to staff. However, these responsibilities can be overwhelming and time-consuming. What if there was a way to simplify these tasks? Imagine having an intelligent assistant that streamlines daily operations, allowing compliance officers to focus on strategic initiatives that drive their passion. This is where AI-powered tools come into play, revolutionizing the way compliance professionals work by enhancing efficiency and effectiveness.
Taking the Repetition Out of the Job
Compliance work often involves repetitive, laborintensive tasks such as sifting through regulatory updates, maintaining policies, and responding to frequent compliance queries. These activities, while essential, can consume valuable time. AI can act as a virtual assistant, handling these routine processes with ease.
Smarter, Not Harder: Automating Policy Updates
Keeping internal policies up-to-date with the latest regulations is a continuous challenge. Regulations change frequently, and ensuring alignment requires meticulous attention. AI-driven tools can automate much of this process by identifying necessary updates and flagging them for review. This automation reduces manual effort and
minimizes the risk of oversight. For instance, a mid-sized bank adopted an AI solution to monitor regulatory changes. The tool alerted the compliance team to relevant updates, reducing the policy revision cycle time by 35%.
Personalized Training, Simplified
Training employees to remain compliant is another critical responsibility. Managing training programs across various roles within an
organization can be complex and resource-intensive. AI can simplify this by creating personalized training materials tailored to each employee’s specific responsibilities. By analyzing job functions, AI can generate customized compliance training modules that focus on relevant regulations and compliance requirements. This targeted approach ensures that employees receive the information they need without overwhelming them with unnecessary details.
Personalized Training, Simplified
Training employees to remain compliant is another critical responsibility. Managing training programs across various roles within an organization can be complex and resource-intensive. AI can simplify this by creating personalized training materials tailored to each employee’s specific responsibilities. By analyzing job functions, AI can generate customized compliance training modules that focus on relevant regulations and compliance requirements. This targeted approach ensures that employees receive the information they need without overwhelming them with unnecessary details.
Opening Up New Possibilities
Compliance concerns often limit financial institutions from fully utilizing communication channels like social media or personalized email to market their products and services. According to a study by Accenture, many banks hesitate to engage in digital marketing due to compliance risks. AI-driven compliance checks can analyze communications before they are released, ensuring they meet all regulatory requirements. By leveraging AI, banks and credit unions can confidently expand their marketing efforts, engage with customers more effectively, and explore new growth opportunities while maintaining strict compliance standards.
A Trusted Partner in an Evolving Industry
As the regulatory environment grows more complex, the demand for technologies that can manage this complexity increases. AI doesn’t replace the expertise and judgment of compliance professionals; instead, it enhances their capabilities, enabling them to navigate the industry’s evolution with confidence and agility. By handling repetitive and time-
consuming tasks, AI allows compliance officers to redirect their energy toward strategic planning, building relationships, and other high-impact activities that propel their organizations forward. This new way of working transforms compliance from a burdensome necessity into an area where teams can thrive and drive innovation.
Take the Next Step
Are you ready to transform your compliance operations and focus on what truly matters? Contact us today for a free demonstration of how our AI-powered compliance solutions can make a real difference for your team. Let’s work together to empower your compliance officers and unlock new possibilities for your organization.
Conclusion
Embracing AI in compliance is not just a technological upgrade; it’s a strategic move that can redefine how compliance officers contribute to their organizations. By adopting AI-powered tools, you can ensure stability, foster growth, and stay ahead in an industry where compliance is key to success.
New ACH Rules Changes Are Fighting Back Against Credit-Push Fraud
By PAM RODRIGUEZ
Payments fraud is surging. According to the Federal Trade Commission (FTC), Americans lost more than $10 billion to fraud in 2023, an increase of 14% over the previous year. Given the increasing prevalence of credit-push fraud, which can use social engineering or email phishing to trick someone into sending funds to an account controlled by a fraudster, these numbers could jump significantly through 2024. A large segment of credit-push fraud can be attributed to Business Email Compromise (BEC), which amounted to more than $55 billion in losses, a 9% increase over the previous year according to the 2024 Federal Bureau of Investigations Internet Crime Complaint Center Report. And while we won’t know 2024 BEC losses for some time, newly released data shows that for the first half of this year, BEC attacks have already increased an alarming 42% over 2023.
New ACH Rules
But Nacha, the administrator of the ACH Network, hopes to change that trajectory with new ACH Operating Rules effective as of October 1, 2024. The new Rules, which are part of a larger ACH Risk Management effort, are intended to reduce the incidence of successful fraud attempts and improve the recovery of funds after fraud has occurred. Three of these Rules specifically target credit-push payments, with a goal of decreasing the occurrence of fraud around this payment type. Specifically, the credit-push payment Rules will:
1.Allow a receiving institution to return a payment that it thinks is fraudulent using Return Reason Code R17;
2.Expand use of Request for Return to allow an originating institution to request a return from the receiving institution for any reason;
3.Provide additional exemptions from the funds availability requirements to include credit entries the receiving institution suspects are originated under false pretenses.
While these new Rule changes provide more flexibility to request and make returns, create additional opportunities to recover funds lost to fraud, and improve the potential for funds recovery, they do require an enhanced level of due diligence and scrutiny, particularly on the side of the Receiving Depository Financial Institution (RDFI). RDFIs will now need to closely monitor and examine potentially suspicious credit transactions to help ensure fraud is not occurring.
Responding to New Requirements
For financial institutions, particularly receiving institutions, that might seem like a heavy lift requiring advanced procedures or technical upgrades, but according to Nacha, this isn’t necessarily the case. Devon Marsh, managing director of ACH network rules and risk management at Nacha, indicated in a recent BankInfoSecurity article, “one common misconception” about Nacha’s new Rules is, “that they require a technical solution for monitoring potential fraudulent activity.”
According to Marsh, “If there is a human-based process, that’s perfectly fine. That satisfies the requirement of the rule.”
So, while changes and enhancements to support the new Rules are necessary, they don’t require significant software or system updates. Enhanced transaction monitoring, increased due diligence, and amended policies and procedures communicated institution-wide will satisfy the Nacha Rules and support increased fraud detectiotn and fraudulent funds recovery.
With that said, it is always advised to have a trusted technology partner who can support advanced threat monitoring for both Originating Depository Financial Institutions (ODFIs) and RDFIs in the battle against fraud. Consider how a technology solution could help
you identify pain points in your current process and speak to providers who can act as true parners in fraud prevention.
In addition, greater knowledge of the new Rules can go a long way to supporting your institution’s preparedness and compliance. That’s why Southern Financial Exchange (SFE), the region’s go-to resource for payments updates, audits, risk assessments, education, and more, offered The Rules Have Changed. Have You?, a live webinar which dove deeper into the impacts and implications of the latest Nacha Rules changes, which is now available on demand at sfe.org.
Preparing for the Future
Fraud is an ongoing challenge for the industry, and Nacha will continue to evolve the ACH Rules to address it. Looking forward, the following Rules have been approved and will require additional compliance considerations for both ODFIs and RDFIs:
• Standard Company Entry Descriptions – Payroll and Purchase (effective March 20, 2026)
• Fraud Monitoring by Originators, Third-Party -Service Providers /Third-Party Senders and ODFIs (Phase 1 effective March 20, 2026; Phase 2 effective June 19, 2026, with a practical effective date of June 22, 2026)
• RDFI ACH Credit Monitoring (Phase 1 effective March 20, 2026; Phase 2 effective June 19, 2026, with a practical effective date of June 22, 2026)
While these dates may seem further in the future, preparations should begin now. SFE can help. Reach out today for resources, education, and support to combat fraud or and effectively manage your organization’s payments operations and Rules compliance. Find out more today at sfe.org.
Pam Rodriguez is President and CEO of Southern Financial Exchange (SFE).
The Evolution of Check Fraud: Challenges and Solutions for Modern Banking
By Phillip Brasfield
Check fraud has a long and intricate history, evolving alongside the development of banking and payment systems. Today, it remains a pressing concern, threatening the financial stability of banks and the security of their customers. The emergence of digital platforms like Telegram has transformed the landscape of fraud, offering fraudsters easy access to dark marketplaces where banking data is readily available.
With minimal technical expertise, individuals can tap into these channels, which are often unmonitored, to purchase sensitive information or participate in fraudulent activities. These channels operate at a rapid pace, closing and reopening within days, making it difficult for financial institutions to keep up. As a result, banks struggle to monitor the sheer volume of channels where stolen checks are traded, creating significant vulnerabilities.
The Changing Landscape of Check
Fraud
The digital evolution of fraud tactics means that community banks must evolve their detection and response strategies. While some banks dedicate entire teams to monitoring these channels, the sheer scale and speed at which they operate make it difficult for most institutions to stay ahead. Furthermore, many banks find themselves illequipped to gather and analyze intelligence quickly, often leading to delays in response times.
Key Challenges for Community Banks
• Monitoring Digital Channels: The rapid creation and closure of illicit channels on platforms like Telegram make consistent monitoring a logistical challenge.
Resource Constraints: Small and mid-sized banks may lack the resources to allocate a dedicated team for fraud detection.
• Communication Inefficiencies: Banks often struggle with ineffective communication channels, making it difficult to share timely information about local fraud incidents. Calls and emails frequently go to the wrong contacts, delaying crucial collaboration efforts.
Leveraging Technology and Data Analytics
Adapting to the evolving nature of fraud requires leveraging advanced technology and data analytics. By implementing proactive measures, banks can detect suspicious patterns early and act before fraud escalates. Building comprehensive digital fraud cases allows institutions to document incidents meticulously and collaborate efficiently. Real-time data sharing on secure platforms ensures all relevant information is promptly captured, enhancing prevention and response efforts.
The Importance of Collaboration and Communication
The battle against check fraud is not one that banks can fight alone. Collaboration among
financial institutions is critical to creating a united front. By fostering partnerships, sharing intelligence, and establishing clear communication channels, community banks can strengthen their defenses.
Building a network where local banks can quickly exchange information not only protects individual institutions but also reinforces the overall integrity of the banking system. Ensuring that each bank has a designated point of contact for fraud-related communications can reduce delays and improve the effectiveness of collaborative efforts.
Conclusion: Adapting for a Resilient Future
As check fraud continues to evolve, financial institutions must adapt. Embracing technology, improving communication, and fostering collaboration are key steps to safeguarding both banks and their customers. By staying informed, proactive, and united, banks can mitigate risks associated with check fraud, ensuring a more resilient and secure financial future.
Your Check is Being Sold on The Dark Web: How Did it Get There and What Happens Now?
Every day, countless checks are stolen and sold on various deep and dark web marketplaces. For fraudsters committing check fraud, this is their everyday job. Just like most people wake up and go to work, so do these criminals. For many, stealing and selling checks is their primary source of income, and they engage in this illegal activity daily. As a result, there is never a shortage of stolen checks available for purchase.
It’s widely known today that individuals’ and companies’ checks are at risk of being stolen. However, what many may not know is how these checks are stolen and what happens once they fall into the hands of fraudsters.
Dark web marketplaces are online platforms accessible through special software, like Tor, where users can buy and sell goods and services, often illegal or illicit, with an emphasis on maintaining anonymity. Transactions often involve cryptocurrency, making it difficult for authorities to trace.
On the other hand, deep web marketplaces operate on standard web browsers and typically feature legal transactions, but fraudsters can still abuse these platforms in some cases.
While there are several ways checks can be stolen, one method is by far the most common: mail theft. A person might drive through
By FraudXchange Team
neighborhoods, stealing all the mail from every mailbox in sight, hoping to find checks. Business mailboxes are especially targeted, as fraudsters can steal multiple checks in one go. Some even go as far as attacking postal workers to steal mailbox keys, giving them access to locked mailboxes across entire cities. They may also steal postal collection boxes, which allows them to acquire a large amount of mail quickly.
Once fraudsters have these stolen checks, they turn to platforms like Telegram. Encrypted messaging apps and online forums provide a venue for them to sell stolen checks. The buyer can negotiate whether they
want a digital scan of the check or the physical check itself, and in many cases, the fraudster offers to “cook” the check by altering the details to make it more profitable.
As a check user, understanding these risks is
essential. To protect yourself, avoid mailing checks when possible, monitor your accounts regularly for suspicious activity, and use direct deposit for payments.
Report any suspicious activity to your financial
institution to act quickly in the event of fraud.
By following these steps, you can greatly reduce your risk of falling victim to check fraud and better safeguard your finances.
Analyzing FinCEN’s Financial Trend Analysis on Mail-Theft-Related Check Fraud
By James Bi, Orbograph
In its latest analysis report, FinCEN reviewed data from February to August 2023, revealing 15,417 SARs filed by 841 financial institutions, totaling over $688 million in suspicious activity(FRB Services). While these numbers may appear low relative to the total number of financial institutions in the U.S., they highlight an important trend. Only 8-9% of the nation’s banks and credit unions are actively reporting mail-theft-related check fraud through SARs, which suggests the issue may be far more widespread.
Key Statistics from the Report:
• Reporting Institutions: Out of 4,500 banks and 4,600 credit unions, only 841 institutions reported mailtheft-related check fraud in this period.
• Average and Median Losses: The average amount per SAR was $44,774, while the median stood at $14,215, indicating that mail-theftrelated check fraud often involves significant sums(OrboGraph).
Strategic Decisions for Check Fraud Detection
The notion of the “death of checks” has long influenced the strategies of financial institutions, contributing to a decline in investments aimed at securing the check payment channel. Steve Cree,
Vice President of ECCHO Rules and Member Governance at The Clearing House, notes that the perception of checks becoming obsolete dates back decades. However, with checks still in use and fraud on the rise, banks are shifting focus. inancial institutions are increasingly turning to cutting-edge technologies, such as AI and machine learning, for transactional analytics and image-based forensics to detect and prevent fraud. Additionally, innovations in dark web monitoring, like Finovifi’s FraudXchange, help banks track stolen check data and take proactive steps.
The Role of Integrated Technology Solutions
While no single technology can address all forms of check fraud, combining different
approaches is proving effective. Providers like Finovifi offer platforms such as TAFraudSentry, which blend AI, dark web monitoring, and image-based verification to streamline check fraud detection.
Conclusion: Evaluating SARs as a Benchmark
SARs offer valuable insights into trends like mail-theftrelated check fraud, but they only provide a snapshot of the larger landscape. Financial institutions must go beyond relying solely on SARs data and adopt a proactive, technologydriven approach to build a more comprehensive fraud detection system. As the threat of mail theft and check fraud continues to grow, leveraging the latest technologies will be crucial for banks aiming to protect their assets and customers.
