Cheque Fraud Detection

Cheque fraud has been one of the largest challenges faced by banks and financial institutions.  Its number has been steadily increasing at an alarming rate. More and more criminals defraud their victims, including the banks, financial institutions or businesses that issue and accept cheque, and the customer, either the account holder or the recipient.

In most cases, cheque fraud begins with the fraudsters stealing a genuine cheque before they alter some or even all the information on the cheque to their own benefits.

Cheque Washing

Cheque washing is a crime conducted by fraudsters by erasing all information, except the signature, on a cheque, either printed or written, with chemicals and other high performance erasers.The information is rewritten to the benefits of the criminal.

Common Methods

  • Use of Genuine Cheque Leave
    Fraudsters tend to abuse genuine cheque leaves, most probably those from other areas that have not implemented clearing automation system, i.e. no MICR characters encoded on cheques.
  • Change of Information
    Fraudsters may change all information, except the signature, on the genuine cheque with false information so that they can abuse the cheques for their own benefits. Otherwise, they may alter, for example the customer’s account information on the cheque to victim’s account information.
  • Imitation of Security Features
    To hinder the detection of the altered information, fraudsters may imitate security features on the cheque (UV box) special chemicals / tools.

Traceable Defects

  • No MICR Code
    Generally, information on the clear band of a legitimate cheque is encoded with MICR and can be read by MICR reader. In case the information is not readable, the cheque, which maybe using E13B font can be suspected as fraudulent.
  • Slightly Damaged Cheque
    By fanning through a group of returned cheques, a staff may suspect the cheque having a slightly different colour than the rest of the cheque in the batch as fraudulent.. Even further, with a more thorough inspection, the staff can find out that fraudulent cheque may be slightly damaged (with stains or discolorations) due to the force used to erase and alter the information.
  • Thin Residues of Original Customers’ Information
    Regardless the chemical material and sophisticated technique applied in cheque washing, it is still possible to identify fraudulent cheques from residues of original information remains on the cheque leave.

Some Challenges

  • Cheque fraud spreads widely, from rural to metropolitan area
  • Front line staff/branch tellers are not equipped with sufficient knowledge about cheque fraud
  • Manual process to detect and identify to cheque fraud is time-consuming and not reliable
  • In most cases, cheque fraud is known after loss
  • Banks and financial institutions urgently require a real-time solution to be applied at the point of presentment at branch level

Cheque Fraud Detection System (Combat against Cheque Fraud)

  • Cheque fraud detection system is fully-comprehensive, no need for expertise or lengthy training of front-line staff/teller
  • The system detects fraudulent cheques at the point of presentment.
  • It scans check images for electronic processing simultaneously.
  • The data cannot be overridden by tellers, avoiding potential collusion between tellers and criminals.