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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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March 27, 2017


Don't Forget the Check

As the data in the recently released Federal Reserve Payments Study show, the decline of check usage continues—albeit at a slower rate than what past studies found. Despite the rapid decline in volume on the consumer side over the last 15 years, the check remains a key payment instrument for business customers. According to the study, in 2015, consumers and businesses wrote more than 19 billion checks representing $27.3 trillion.

While the share of the number of checks (12 percent) is dwarfed by the number of other noncash payments (debit/credit/prepaid card and ACH), which continue to grow, the check remains a key target of criminals. For that reason, we need to maintain, if not enhance, risk monitoring. Criminals use the check both to conduct fraudulent transactions and to launder money. The Financial Crimes Enforcement Network reports that the number of Suspicious Activity Reports (SAR) involving checks continues to increase. That number has grown more than 141 percent since 2013, as the chart shows. Also, checks are 71 percent of the total—by far the most common payment type of all the SAR categories.

Chart-one

In addition, the Association for Financial Professionals notes in its 2016 Payments Fraud and Control Survey that checks remain the most targeted payment method. Seventy-one percent of the 627 responding companies reported successful or attempted check fraud on their business accounts in 2015. The survey also found that checks accounted for the largest dollar amount of loss of all the payment methods, including wire transfers. On a positive note, the percentage of companies actually suffering a financial loss from check fraud declined from 57 percent in 2013 to 43 percent in 2015.

Checks remain a target since they are so easy to counterfeit or alter compared to electronic items. While much of the risk management effort focuses on electronic payments, be sure not to forget about the paper check. It is obvious the crooks haven't.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

March 27, 2017 in checks , cybercrime , fraud | Permalink

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