Bankers Association reports: Attempted check fraud rises, but losses relatively stable

Attempted check fraud at the nation's banks surpassed $4.3 billion in 2001, doubling for the second time in four years, according to the latest American Bankers Association Deposit Account Fraud Survey Report.

While attempted check fraud losses continued to rise, actual dollar losses remained relatively stable at $698 million.

That's up slightly from the $679 million that banks lost in 1999, the last year of ABA's biennial survey.

Banks' check fraud prevention systems were credited with keeping actual losses significantly lower than the attempted fraud numbers.

Attempted fraud totaled $2.2 billion in 1999.

Since the last survey, the number of check fraud incidents increased 34 percent to 600,085 cases in 2001. However, average losses per case went down from $1,518 in 1999 to $1,163 in 2001.

Large banks' share of losses fell from 60 percent in 1999 to 55 percent in 2001. Although they continue to have the largest number of attempts, large banks also have the best record in loss avoidance, preventing more than 80 percent of check fraud attempts.

On the other hand, community banks' share of losses doubled rising from 6 percent in 1999 to 13 percent in 2001 signaling a shift in crime to community and mid-sized institutions. Community banks prevented a little more than half of their attempted fraud.

Losses remained relatively stable at mid-sized and regional banks.

"This survey has become the industry benchmark for deposit account fraud," said Richard J. Clausen, member of the ABA Fraud Prevention Oversight Council and senior vice president, liability risk management, Bank of America.

"Sharing loss information and best practices for preventing losses with peer banks is crucial to the banking industry's check fraud prevention efforts. Banks across the country use this data to determine where to target their resources in check fraud prevention."

The most common fraud prevention practices at banks of all sizes were employee training, signature verification systems and the use of new account screening software.