Check Fraud Is Up Nearly 400% and FinCEN Points to Banks

We all know the expression, “A classic never gets old.” It applies to everything from filmmaking to fraud. With digital detection tools evolving fast and humans getting better at using them, some crooks are doubling down on the classics: mail theft and check fraud. 

In a September press release, the Financial Crimes Enforcement Network (FinCEN) unit of the US Department of the Treasury released a trends analysis on check fraud incidents related to mail theft. This analysis used Bank Secrecy Act (BSA) data filed in the half-year after FinCEN’s previous FTA on mail theft and fraud in 2023. 

During that review period, FinCEN’s September 2024 report said it “received 15,417 BSA reports from 841 financial institutions on mail theft-related check fraud, amounting to more than $688 million in reported suspicious activity,” adding that “The average activity amount reported per BSA report for mail theft-related check fraud was $44,774, while the median amount was $14,215.” 

A spike in check fraud is especially damaging for business payments, as the amounts are larger and represent not just money but trust. Businesses have high expectations of banking partners to guard against precisely this kind of bank-centric fraud activity. 

However, FinCEN said close to 14,000 of all mail theft-related check fraud BSA reports were filed by banks, “accounting for 88 percent of the filings during the review period,” adding that according to Federal Reserve rankings, “The largest US banks by asset size...filed 44 percent of the BSA reports from banks.”  

It’s a sign that the digital transformation of B2B finance is far from complete, even among big banks and large companies. Meanwhile, paper checks remain a prime vulnerability.  

“Fraudsters constantly seek out the weakest link,” said Ruud Grotens, Head of CFRM Solution Consulting at Bottomline. “Although digital fraud detection has advanced significantly, criminals may be finding it easier right now to exploit weaknesses in physical security systems.” 

“This results in a resurgence of traditional methods, such as paper check theft, particularly if these approaches offer a higher success rate or pose lower risks,” he said. 

FinCEN also noted that 635 unique banks filed BSA reports indicating mail theft-related check fraud, “which included 31 banks that filed more than 100 BSA reports during the review period. In this dataset, financial institutions that filed BSA reports included instances when clients were victimized and had deposited or attempted to deposit stolen or counterfeit checks.” 

Stolen Checks Are No Paper Tiger 

In scrutinizing its latest Financial Trend Analysis, FinCEN found “three primary outcomes after checks were stolen from the US Mail:” 

• 44% were altered and then deposited 

• 26% were used as templates to create counterfeit checks 

• 20% were fraudulently signed and deposited 

“Check manipulation methodologies ranged in sophistication, and many perpetrators tried to avoid interaction with bank personnel,” FinCEN said. 

The activity is also widespread, they added, with “transactional activity or BSA filing subjects linked to every US state, Washington, DC, and Puerto Rico. While every state was affected, populous states with large urban areas had more reported incidents.” 

Many banks – but not all – have been digitizing as a top priority for nearly five years. Even banks and FIs that have made significant investments in digital capabilities will often leave gaps, creating opportunities for fraudsters to exploit. Banks must evolve faster. 

“Traditional check image analysis solutions lacked AI capabilities,” said Ruud Grotens. “Now, advanced systems powered by artificial intelligence (AI) and machine learning (ML) can detect alterations, forgeries, and suspicious activity with greater accuracy.” 

Implementing continuous monitoring of account activity to identify unusual patterns, particularly in new accounts or transactions involving large-value checks, is vital to keep banks and FIs secure against old and new kinds of check fraud, he said. 

Enforcement With Fangs 

The American Bankers Association (ABA) and the US Postal Inspection Service took the wraps off a joint effort in March “to combat the rapid rise in check fraud, which has increased nationwide by 385% since the pandemic,” according to the US Treasury Department.  

Per a statement released in March, “ABA and USPIS’ anti-check fraud initiative will focus on four main areas: educating US Postal Service and bank customers about check fraud and what they can do to protect themselves; addressing money mules and collusive account holders; collaborating with law enforcement; and training bank employees and postal workers on red flags and prevention.”