The Club PUBlication 1/1/2024

CHECKS AN EASY TARGET FOR FRAUD
By TARA SIEGEL BERNARD • New York Times

Using the difficult things in her life as fuel, Regina Marie Williams delivered surpassing artistry onstage in 2023.

When Pam Berns mailed a few checks to pay bills, she had no idea such a routine task would throw her small publishing business into chaos.

One of the checks, which she put in a mailbox on a Lincoln Park street in Chicago, was later stolen and rewritten for $7,200 to someone named Mark Pratt. That drained her business bank account, which meant she couldn't pay the printer, her monthly payroll taxes or her salespeople.

Nearly two months later, Berns, 76, hasn't recovered the stolen money from her bank, BMO, which is still investigating the matter.

"A friend told me, 'Whatever you did to get robbed, just don't do it again,' " she said. "I just mailed checks. Most of us are vulnerable."

What was once a routine way to pay your bills — handwriting paper checks at the kitchen table, dropping envelopes into a blue metal box on the street — has become a highrisk endeavor: It provides the raw materials for low-level fraud artists and sophisticated crime rings, costing financial institutions billions.

It has put banks on high alert, though their efforts to catch the fraud also routinely entangles innocent customers, causing institutions to suddenly freeze or shut down customer accounts in the process. Many fraudsters manage to disappear without any consequences.

"Fraudsters go where the money is easiest," said Chad Hetherington, a vice president at Nice Actimize, a financial crimes company specializing in fraud prevention.

Even as check usage has rapidly declined over the past couple of decades, check fraud has risen sharply, particularly since the pandemic.

The cons may start with stealing pieces of paper, but they leverage technology and social media to commit fraud on a grander scale, banking insiders and fraud experts said.

In the past, criminals needed a special internet browser that would grant entry into the dark web marketplace of stolen checks, maybe even someone to vouch for them. Now all they need is an account from Telegram, a messaging app.

"You can buy checks on the internet for $45, with a perfectly good signature," said John Ravita, director of business development at SQN Banking Systems, which provides check fraud detection software. "There is one website that offers a money-back guarantee. It's like Nordstrom."

A recent surge in mail theft caused the Financial Crimes Enforcement Network — an arm of the Treasury Department known as FinCEN that is charged with safeguarding the financial system — to sound alarm bells this year.

Thieves have attacked mail carriers or stolen and sold carriers' arrow keys, which unlock mailboxes within a certain area. The checks are stolen from the mail, and then criminals carry out a classic fraud: "washing" the checks using something as basic as nail polish remover, leaving the signature untouched. Others "cook" new checks by scanning and altering the old ones.

Some criminals deposit checks into their own accounts, while others list them for sale. But the schemes have grown sophisticated.

Not only can thieves buy stolen checks; they can purchase bank accounts in which to deposit them, along with the mobile phone number and device used to create that account, among other things.

Banks and credit unions are expected to file nearly 540,000 suspicious activity reports tied to check fraud this year, a record, according to a Thomson Reuters analysis of data from FinCEN. That's about 7% higher than 2022 but more than double the levels in 2021, when fewer than 250,000 such reports were filed.

Bank anti-fraud measures, however well intentioned, also may misfire, turning consumers' financial lives upside down.

Tyler Keefer's troubles started when he sold his Kawasaki Ninja motorcycle. Accepting a check from the buyer caused Keefer's bank, Ally, to lock him out of his account, cutting him off from his main source of money just before he had to pay rent. Then it dropped him as a customer altogether.

The check had been flagged as potentially fraudulent by the check-issuing bank, PNC, because it believed it contained handwriting from two different people, he said. The bike buyer cleared up the matter with his bank and ultimately paid Keefer in cash without incident.
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Ally, however, wouldn't budge. "From their perspective, I had cashed a fraudulent check," he said. "Ally wouldn't talk to PNC about that.

There was no coming back."

Ally and PNC declined to comment.
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"Funny enough, I still have the check," Keefer added. "I kept it as proof. I was worried they were going to put some sort of thing on my record and that other banks wouldn't take me. I kept all of my information."

John Ravita, SQN Banking Systems