Information about Check Fraud
Basic Check Fraud Statistics
Here are some facts and statistics about check fraud compiled from various sources:
- A survey of 3012 corporate members of the AFP received 414 responses.
- 72% of organizations experienced attempted or actual payments fraud in 2006.
- Nearly half of organizations added to their internal controls and procedures during 2006 to bolster their protection against payments fraud.
- One-quarter of organizations either added or revised approvals for check payments during 2006.
- Nearly all organizations that experienced payments fraud were victims of attempted check fraud.
- Summary Quote: “While check imaging and check conversion are driving paper out of the system, businesses and other organizations continue to make the bulk of payments by check.”
- More than 75% of business-to-business transactions are made by check.
Association of Financial Professionals statistic, reported in the Wall Street Journal 10/28/04, section B - Does Crime Pay? 2% imprisonment rate for check fraud.
Department of Justice 2004 - From 1988-1999, financial institutions recovered less than 5% of court-ordered restitution in check fraud cases.
Department of Justice 2/99 - 55% of survey respondents indicate that their organization was a victim of payments fraud in 2004. Among these organizations, 94% indicate they were victims of check fraud. Check fraud was the most prevalent form of payments fraud. Since the majority of organizations make more than 80% of their payments by check, according to the 2004 AFP Electronic Payments Survey, it is not unexpected that the most frequently used payment method should be the most frequent target of attack.
(Source: Payments Fraud and Control Survey, Association of Financial Professionals, March 2005) - In 2003, 75 percent of commercial banks incurred check fraud losses, up from 72 percent in 2001.
- In 2003, the total amount of attempted check fraud against commercial banks' deposit accounts, i.e. risk exposure, amounted to $5.5 billion ($4.3 billion in 2001). Eighty-eight percent of the $5.5 billion check fraud attempts were caught by banks' prevention systems or measures before any losses were incurred.
(Source: American Banker's Association, November 2004. http://www.aba.com/Surveys+and+Statistics/SS_Depositfraud.htm) - Each day, 175,000 fraudulent checks are presented (low-end), representing approximately $41 million in face value.
- Actual bank losses are approximately $700 million per year.
- Mid-size banks ($500 million to $50 billion in assets) experienced the greatest increase in check fraud, a whopping 46 percent over the prior period.
(Source: Cornerstone Advisors, Inc., May 28, 2004. http://www.gonzobanker.com/Content/CheckFraudLosses.htm) - In 2003 check fraud exceeded $20 billion per year, up from $12 billion in 1996 and $5 billion in 1993.
(Source: Nilson Report) - For the period of April 1, 1996 through September 30, 2003, the FBI received 268,536 Suspicious Activity Reports (SARs) for criminal activity related to check fraud, check kiting, counterfeit checks, and counterfeit negotiable instruments. These fraudulent activities accounted for 47 percent of the 569,294 SARs filed by U.S. financial institutions (excluding Bank Secrecy Act violations), and equaled approximately $8 billion in losses.
(Source: FBI Financial Institution Fraud and Failure Report for Fiscal Year ending Sept. 30 2003) - Recent Secret Service investigations indicate that there has been an increase in ... counterfeiting of corporate checks and other negotiable instruments ... created with the use of computer technology. The US Secret Service estimates $5 billion a year in the United States alone is the toll of check fraud. In fact, the chief of the agency's financial crimes division calls check fraud "the number one way criminals today are attacking our financial systems."
(Source: U.S. Secret Service) - The top 1,000 U.S. companies have been surveyed, asking them to rank the crimes that hurt their business the most, both internally and externally. Check fraud made the list approximately 10 years ago, when it ranked ninth. It now ranks second.
(Source: KPMG International, 2003) - Check fraud ranks second, behind embezzlement, on the list of crimes that most hurt America's top 1,000 companies.
(Source: American Payroll Association's PAYTECH magazine, November 2002 issue) - Check fraud is among the fastest-growing problems affecting financial institutions with check fraud attempts at U.S. banks reaching $4.3 billion in 2001, almost twice the $2.2 billion in 1999.
(Source: 2002 ABA Deposit Account Fraud Survey Report) - More than 500 million checks are forged annually in the U.S., with losses totaling more than $10 billion.
(Source: Ernst & Young) - Losses from check fraud are expected to grow by 2.5 percent annually in the coming years.
(Source: American Banker magazine) - Check fraud and counterfeiting are among the fastest-growing problems affecting the nation's financial system.
(Source: National Check Fraud Center)
General Check and Occupational Fraud Information
Organizations with fraud hotlines cut their fraud losses by approximately 50% per scheme. Internal audits, external audits, and background checks also significantly reduce fraud losses.
Small businesses are the most vulnerable to fraud and abuse. The average scheme in a small business causes $127,500 in losses. The average scheme in the largest companies costs $97,000.
The most common method for detecting fraud is through tips from employees, customers, vendors and anonymous sources. The second most common method of discovery is by accident.
The typical occupational fraud perpetrator is a first-time offender. Only 7% of occupational fraudsters in this study were known to have prior convictions for fraud-related offenses.
All occupational frauds fall into one of three categories: asset misappropriations, corruption, or fraudulent statements.
Corruption schemes account for 13% of all occupational frauds and they cause over $500,000 in losses, on average.
Fraudulent statements are the most costly form of occupational fraud with median losses of $4.25 million per scheme.
Frauds committed by employees cause median losses of $60,000, while frauds committed by managers or executives cause median losses of $250,000. When managers and employees conspire in a fraud scheme, the median loss rises to $500,000.
Losses caused by perpetrators older than 60 are 27 times higher than losses caused by employees 25 and younger.
The average fraud scheme lasts 18 months before it is detected.