Tool 7: Understanding Risk
Going Forward
Here are some technologies and processes every bank should consider to help mitigate risk in the Check 21 world.
Image and Substitute Check Quality Control
Quality is critical to detecting fraud in the images and substitute checks. Without clear resolution, paying banks won’t be able to detect abnormalities in checks and thus fraud. Since paying banks can make claims against any bank that handled a substitute check, or image of a substitute check, those banks creating or handling substitute checks and images must invest in technology to ensure the greatest clarity in substitute checks and images.
Image Survivable Security Features
New image survivable security features that are usable in existing check processing equipment are available today, and others are under development. These features will help address concerns over the loss of paper check security features, such as watermarks and infrared ink. Many of these tools will prove superior to paper check processes as they can be reviewed on an automated basis, allowing for a greater volume of checks to be examined with objective techniques. These products usually embed within printed documents (like checks) a digital code that is imperceptible to the eye, but readable by computers and software. One- and two-dimensional bar codes and encrypted document identification numbers are examples. These codes can be used to verify the authenticity of a check and can include, for example, details of check information such as the payee and amount to ensure that it has not been altered.
Image Technology
Image technology itself offers great potential to prevent check fraud. It allows banks to inspect more checks and compare more check information in an automated fashion. It also allows more employees to view items online – in real time – so that items can be referred to specialists instantaneously. This greater capacity to examine more checks and check information means greater ability to catch fraudulent items.
Branch Teller and Support Areas
As check truncation evolves and expands, tellers may be the only people in the processing cycle to have access to the original check and the opportunity to inspect it. Accordingly, training is critical for tellers and branch platform staff so they become even more sensitive to fraudulent documents, including checks and identifications. They should examine deposits closely for alterations and check for instructions about security features that might be noted on the check.
Tellers and branch platform staff should also be trained to flag checks that are intentionally made to provide a bad image, such as by use of red or pink ink. Training is especially critical for those banks that create images or substitute checks, as ultimately they will bear any losses due to the fact that the original check could not be examined.
Customer Service Platform
Customer service platform personnel require training on how to handle customer claims that a substitute check transaction was not authorized because the original check may not be available. They must be familiar with substitute checks and images and how to retrieve them, as well as the documents needed for the customer to file a claim.
High Speed Processing and Reject Repair Departments
Initially, criminals may attempt to take advantage of the confusion surrounding the first appearance of substitute checks. They could, for example, deposit a substitute check that contains an image of a legitimate check, but is encoded on the bottom with account and routing numbers that are different from those on the check image. Because the reject/repair department handles a high concentration of fraudulent items, it should use the opportunity to ensure that the routing and account numbers on the check image comport with those encoded on the substitute check.
AMERICAN BANKERS ASSOCIATION1