Check Fraud Losses Rise despite a Drop in Cases

Article excerpt

By STEVEN MARJANOVIC A slight decrease in the number of check fraud attempts in recent years might lull bankers into a false sense of security, a top industry official says.

A survey by the American Bankers Association has found that check fraud attempts fell to 288,546 in 1997, down from an estimated 399,300 cases in 1995.

But bank losses from check fraud were $512 million in 1997, up from $487 million in 1995.

Dick Clausen, senior vice president of BankAmerica Corp. and chairman of the ABA's deposit account fraud committee, said he suspects that the problem's true extent has been masked by the way banks report check fraud losses.

"I believe the numbers are bigger than what the numbers indicate in the ABA study," Mr. Clausen said.

He said the Nilson Report estimates that banks lose $1.3 billion a year to check fraud. Combined with losses suffered by merchants, the estimate rises to a staggering $13 billion. Most banks do not have a standardized way to track check fraud, he said. Some find it difficult to distinguish whether their losses are from check fraud, robbery, or employee theft.

Others may have been vague in their responses, unwilling to disclose excessive losses.

"We have to account for the losses better because if we don't we are going to continue having a difficult time building a business case for the industry," Mr. Clausen added.

Questionnaires were mailed to 5,000 banks for the biennial survey. There were 446 responses.

The study found that check fraud on large banks-those with $5 billion of assets or more-grew 38.2% from 1995 to 1997, compared to just 5.2% industrywide.

Check fraud losses were reported by 49% of the responding community banks-those with assets of less than $500 million-and 90. …