Can someone cash a check you’ve written more than once? Yes, thanks to the intersection of very old and very new banking technology. Impossible until recently – payees formerly were required to hand paper checks over to banks during a deposit – some experts predict “double presentment” will be the source of a new fraud wave coming soon. And if you don’t know about it, even if you don’t use mobile banking, you might have to foot the bill.
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It happened to Louise Moon Rosales of Vermont. Twice in the past year, she wrote checks to pay for small services such as yard work. Both were cashed…and then cashed a second time a few months later. Her bank honored both payments. For example: a $100 check she wrote to a high school student for yard work was cashed in December, and then again in April. How?
The student used a new, popular checking account tool called “remote deposit capture” — he deposited the check with his cell phone. Check recipients who do that get to keep the paper check, rather than hand it over to a teller or an ATM. That means the check can be deposited a second time, a problem known in banking as “double presentment.”
“I totally could have missed it,” Rosales said. “If didn’t use Quicken I would have….I use online Quicken to reconcile the accounts, and that is how I found it.”
It seems almost too simple: criminals re-depositing the same check multiple times. But with the meteoric rise of remote deposit capture and mobile banking– some analysts think half of all retail deposits will utilize the technology by next year — banks are racing to compete with each other to offer the service. That means they are beginning to favor speed over safety.
And there’s another element which makes mobile banking ripe for the next wave of fraud, predicts analyst Shirley Inscoe of Aite Group. With chipped “EMV” credit card chips finally becoming a reality in the U.S., eliminating one popular kind of fraud, criminals will aggressively hop to another technique to replace lost income.
“I predict that organized fraud rings – which will be actively looking for new targets as EMV becomes more fully implemented – will discover (mobile remote deposit capture) in a big way,” she said.
Spotting fraud takes time, and use of fraud-fighting technologies is always a tight balancing act of convenience vs. security. It seems logical that a bank would quickly scan check numbers to make sure the exact same check hasn’t been deposited before, but for small dollar amounts, even that level of delay can be seen as unnecessary. Still, banks have historically been good at catching double presentment at the same institution using the same channel — the same check deposited twice using the same mobile phone, for example — says analyst Bob Meara of Celent.
But if criminals use different channels — first time on a phone, second time at an ATM — that gets a little trickier.
And depositing the same check into multiple different checking accounts at multiple banks? Well, that’s a big problem.
“Even the most rigorous deposit review mechanisms are powerless to identify and reject items that have been previously deposited at other financial institutions,” Meara writes in a recent report.
Part of the problem involves honest mistakes, which turned out to be the source of Rosales’ trouble. One check was refunded by the bank, the other by the student. “Accidental double presentment” occurs when a consumer isn’t sure if she/he (or a spouse) previously cashed a check. The problem is a new one for consumers, who aren’t used to hanging onto physical checks after they’ve been cashed. Some banks tell consumers to hold on to the paper for a month or more, leading to inevitable confusion over what’s been cashed and what hasn’t.
Until recently, banks have been very judicious about granting remote deposit privileges to account holders, which has kept fraud rates very low. Tenure with the institution, deposit history, and average daily balances have all dictated which consumers or businesses were granted mobile deposit eligibility. Banks have also established low maximum daily deposit limits, another disincentive for fraud. Meara says fraud has been extremely low.
“Indeed, banks wish credit card portfolios would perform in such a fine fashion,” he said. Mobile deposit security technologies are “light years ahead of what was once status quo: taking manual deposits at the branch.”
But with the new, highly competitive environment, pressure to accept remote deposits from anyone…and for high deposit limits…has led to lowering of standards, Inscoe said. That means more fraud, Inscoe warns.
“As I continue talking with financial institution execs, I am hearing that more and more banks are dropping the requirement that an account be opened for a specific period of time before being eligible for MRDC due to competitive pressures. As that requirement is dropped, fraud is becoming quite a problem,” she told me. “At some point, the need for fraud relief may outweigh the competitive pressures and force banks to reinstate the new account ‘wait period’ before allowing customers to use MRDC.”
RED TAPE WRESTLING TIPS
Watch for checks cashed twice! Consumers should take heed of Rosales’ lesson. If she didn’t catch the double withdrawals, she would be out the money. Don’t rely on your bank’s department to catch the problem.
Even if you don’t use mobile banking, you can be a victim. It’s also incredibly important to understand that you can be a victim of double presentment even if don’t use online banking or mobile banking. All that matters is the criminal/absent-minded payee uses remote deposit capture. All you have to do is write an old-fashioned check to be victim or the latest banking fraud.
UPDATE:Rosales’ bank is TD Bank. The firm told me it couldn’t discuss an individual consumer’s account, but offered this statement: “TD takes the safeguarding of our customer information seriously and has fraud detection processes in place to help protect customers.”
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