Day-Zero Check Fraud Defense: Your 2026 Check Fraud Playbook and What FIs Must Do Now to Stay Ahead

And thank you all for joining us today. My name is Hara Talcott. I am the marketing communications coordinator here at Alligent. For today's session, we're partnering with Mitek to bring you the Your twenty twenty six Check Fraud Playbook webinar. We'll be going over emerging fraud trends that we see in the industry today and what steps your institution can take to mitigate those risks. Joining us today, we have two wonderful speakers for this discussion. We have Doug Hendricks, Alligent's senior product manager for our payment solution, and Derek Abbott, the senior business intelligence and strategy manager for Mitek. If any questions come up during the webinar, please feel free to type them into the chat box. We'll have a designated q and a segment at the end to answer any of those. And with that, I'm gonna hit or hand it off to these two. Thanks, Gary. I appreciate the intro. Derek, thanks for hopping on and doing this with us. Always enjoy having conversations like this with our partners that, you know, specialize in the the industry and, you know, check fraud is always a good conversation to to have. So appreciate you joining us today. Yeah. Thanks, Doug. It's glad to be here. It should be a good one. Yeah. Alright. So we'll jump right in. So, you know, it's a, you know, short kind of agenda with a lot of a lot of conversation to have. And, you know, the focus points today will be, you know, why check fraud still matters, you know, kinda I mean, at the end of day, it's not going away. It's continuing to stay and so are checks. So the five lines of defense against check fraud, really, the the lens and version of twenty twenty six check fraud and, you know, how FIs can, you know, help work the challenges of it, along with, you know, what Unifi is doing in partnership with Mitek and Check Fraud Defender to, support the FIs. So let's, go ahead and jump right in. Check fraud still matters. Check fraud exceeded twenty four billion dollars worth of losses in twenty twenty five. Derek, you guys on the Mitek side, obviously, the the industry expert level, is that is that a shocking number to you? Twenty four million? No. Not at all. You know, when I I was kinda doing a little bit of reading and kinda digging into things. And, I mean, when you kinda look at checks, I mean, they've remained the number one payment method, right, being attacked by fraudsters. It's easy. It's simple to get into. It's cheap to get into. I was reading a a survey recently. You know, it was the twenty twenty five AFP payments fraud and control survey, and they said sixty three percent of organizations reported attempted or actual check fraud in twenty twenty four. And, you know, and you think of that, and the first thing I I was come on, like, why? Right? What is the why is this happening? So I when you kind of think, you know, there's places like Facebook, Telegram, all these different, I call them, like, Hangouts where the fraudsters can kinda get together and collaborate. You know, they sit there. They collaborate. They train each other. They sell stolen checks and identities. What's kinda scary about that is for less than twenty five dollars, someone can buy a stolen check, and they can start committing fraud. Wow. And, you know, as I kinda read yeah. And as I kinda read and look at these channels more, if they run into any sort of trouble, they can reach out, and they can ask for help, and they get provided tutorials and tips and tricks. And, you know, one of the things I always I find myself saying a lot when I meet with our different clients and, partners is that fraud has become, like, the cool thing to do. Right? Way you know, fraudsters are out there flaunting their successes pictures of, like, luxury cars and stacks of cash and goods. It just looks like there's no downside to doing it, so everyone's doing it. Yeah. I mean, sixty I mean, based off, you know, the eight thousand plus institutions, sixty percent, that's that's a huge number. And then I like kind of the the point of referencing how, you know, the social aspect on the fraudster side because we know that, you know, online account openings, funds availability, all of the deposit channels now being part of that fraudster focused element. Right? It's there's the digital channels that didn't used to exist. You still have traditional channels that are still fighting the uphill battle. And so, you know, the blend of the two has certainly created a kind of, you know, storm of, you know, opportunity, and they certainly seem to be really leaning heavily and taking advantage of just everyone. And we and, you know, we know that we've had conversations amongst our partnerships that, you know, that's where we see the beauty of what you guys do and the products that you have and then where we kind of, you know, associate that and use that within Unify to try and help FIs really keep up with the speed in which it moves because it it it truly is, you know, it it truly is that fast and that big and changes from town to town, from day to day, from week to week. So wow. Okay. So let's jump right in. Five lines of defense against check fraud. You know, obviously, you know, the way that you guys have your approach with our partnership, you know, the check image analysis. But I think that when you look at the, you know, each kind of bullet for the five points, it it all speaks to very specific scenarios of really toll gates of potential failure. Right? If you're not working day one day zero, day one, you're waiting until day two, you're now forty eight hours potentially behind. On us checks for manual processes. You know, everybody tends to focus on the transit checks, but yet, you know, we've seen the numbers related to on us items in the manual review that can go again another twenty four hours. The real time effort is, you know, certainly where you want to get to moving forward in technology, AI, analysis to stay ahead. That's some of the really cool touch points that you guys have. And then, you know, stay agile with real time rules data. I mean, you know, I think it all speaks to it. So let's jump into the the first one for fraud decisions at day zero. You know, where do you guys see that being such a pivotal element to check fraud, you know, mitigation and prevention? Yeah. You know, with the way the industry has been going over the past few years and where we're continuing to go, and because we're all fraud fighters, I can I can say this? As we know, customer experience more times than not takes precedence over fraud loss and creating any sort of friction. Right? So, you know, as I as I meet and I talk with fraud teams across the US, pretty much we hear that all the time that funds are being made available too quickly. And with the systems they have in place today, they aren't able to really get in front of it and stop it. You know? And that that's kind of why it's it's become so important to be leveraging a system that's able to detect and alert on potential fraud at time of capture or time of deposit. You can't wait day one or day two anymore as you're fighting these more skilled counterfeits and forgeries alterations that we're seeing. We need to be able to prevent it and detect it at the time that it's being captured. You know? And when you kinda think of when I when I think of real time, I think back when I was a teller. And, you know, this was really as check fraud really started to ramp up, and they were asking all the tellers to kind of interrogate the items and kinda do your due diligence. That's not what a teller should be focusing on in my mind. You should be leveraging some sort of technology that can do that for you. And the teller is just there to accept the deposit and kinda keep the customer in front of them happy. Yep. So that's agree. Teller days for myself as well. Like, it's one where the the quality is also wildly changed in, you know, what is being presented as a fraudulent check versus what used to be. Right? You know, you used to be able to hit the the z scan real quick while looking at the ID at the same time, and it's like, oh, well, that doesn't really align. But, you know, there's so much information available, and the quality of the checks being presented, and it matches. Right? You know? And it's not all that much of a lift for these fraudsters to be able to put, you know, those items together. And, yeah, it's it's it's certainly a different landscape than than it used to be. And I think to your point, it also carries over to, you know, the digital channels now in a significant way. Right? That ATM, ITM deposit that comes in over the weekend, we all know that, you know, consumers want their money and you wanna make it available. So how do you put, you know, your best foot forward to try and put in a mitigation point on Saturday before, you know, maybe two hundred dollars gets released and come Monday morning, it's gone. And, you know, leveraging the digital solutions that essentially can provide that that feedback for you in an automated landscape without, you know, that teller, that person needing to be present is is a significant win. So I yeah. It's it's different and changing for sure. So that'll push us right into, you know, traditional honest manual check review. You know, I think this is a unique landscape that you guys have some pretty cool insight in because, again, that that honest world is not the primary focus when you have a lot of conversations or at least when I have a lot. It's the the transit items and, you know, the items that come back in the return files. You know? Can you speak a little bit to, you know, what you guys see in that that on us space that's a little bit different from, you know, the the the conversations about transit. Yeah. And I'm gonna make this a little different. You know, here at Mitek, we don't actually consider really you know, at least in my mind, we've kinda gotten rid of the idea of on us. We consider you know, when we look at items in the way our system is built, a check is a check. And the reason I say that is because, you know, with Checkfront Defender and our consortium that we've built, what we've done is we have image profiles for bank accounts and institutions across the US. We have accounts from multiple of the top ten down to the little single branch credit unions and community banks and then pretty much every size in between. So for us, you know, it's not really a conversation of, well, how was your on us versus your transit? It is how was what is your in clearing strategy versus what is your ATM and your teller strategy, and let's handle them all differently. Because, again, we're detecting things, and we're opening up insights that a lot of banks don't have ins like, they never had before. So you're able to kinda leverage these new signals that you don't know you know, you've never had, you know, what is normal for this account drawn on this bank. You can kinda handle them all as on us because it doesn't matter anymore because we're making it available to you for detection. So it really helps kinda change the strategy of a whole as a whole on the fraud side because, again, you know, you're longer looking at, you know, different different pieces and different channels. Now it's all, well, these are checks. We know these match what they're supposed to. These don't look right. So now let's go off and kind of attack them in differently. Okay. So less of a, hey. This isn't on us, so my immediate risk factor and my alerts are going down and more of just the holistic from, you know, your check fraud mitigation. Hey. This is what we know, and we actually know that we've seen four presentations of fraudulent checks with this routing and account number, and it looks like you just sent us number five. And sure, it's drawn on your bank, but, you know, hey. Good news. Glad you reached out. We don't differentiate that way. And so okay. That's that's, yeah, that's a neat way to look at it because I, you know, again, I think that's another one where it's easy to get and stuck in the narrative, you know, for from an FI perspective of, you know, on us, all of a sudden risk factors start going down because I should have more insight. And, you know, today, you know, I've seen and had conversations with, you know, you guys, and you've shown that at the end of the day, that's not a hundred percent the truth anymore. So that's that's an interesting space. Okay. So let's talk about, you know, AI, favorite topic of just about any aspect of, you know, anything going on in the world today. But let's talk about how, you know, for this solution, which I call Defender and my tech's view of it, I know we're using all kinds of different lenses and views of how, you know, AI fits within UniFi as well. Talk a little bit about the that image analytics piece and, you know, how you guys are moving forward, giving that AI is taking a real relevant stage, you know, in today's technology landscape? What what do you guys see as kind of the next steps and the strengths right now? Yeah. And to kind of understand where we're coming from, I think you need to kind of think of the problem right now. Right? Over the past few years, as I'm sure everyone knows, there has been a huge mail theft epidemic going on in the United States. And why I mentioned that is because institutions need to move away from transaction only systems. When you think of the nature of mail theft, what that actually means is the fraudsters now know what the items they're trying to create fakes up are supposed to look like. Right? In the past, I it was always what I used to call, like, unskilled counterfeits, meaning they had an account and routing number. They didn't know anything else. They would just put a fake check together and move on. Yeah. But with this huge shift that we're seeing, now, you know, the the fraud landscape has become at least from what we're seeing, it's very alteration heavy. And the challenge with alterations is a lot of the times, the serial number, the amounts aren't being changed. It's just the payee. Right? So traditional transactions aren't gonna detect them. Transaction system will detect them because it's gonna be in range. The amount is gonna make sense for the person. It's none of that's being changed. It's just who it's written to, which is why, you know, from a Mitek standpoint, we have started to really invest and kind of look at what we can bring in from an image side to help to detect these scenarios, whether it's like handwriting or the font analysis or, you know, kinda looking at different parts of the check. We're always adding in new, what we call detectors, which just means we're looking at different parts of the check, comparing it to known good examples of that. So we're kind of looking for differences on location and size and fonts and handwriting to kind of help us pick up on potential scenarios where things are altered or, you know, very strong counterfeits or things like that now. And I think that's a really good point because I've had multiple conversations, I would say, within the past month or two. And the fraud challenge that was going on, you know, it it wasn't someone who was in for, you know, historically speaking, a one time shop. Right? Try and get ten thousand, try and get fifteen thousand. It was multiple checks falling in under the five hundred dollar threshold or the two hundred and fifty dollar threshold. And, you know, just a very different flavor. And to your point, all of the information was clean. But the dollar amount, it was how many times can they get them through, how many times could they come back, very much less about the large dollar amounts and purely focused on, alright. Well, we think this will fly under the radar. Very clean checks, a few anomalies here or there, but how many times can we get it through? And alright. Well, so now let's pick up shop and move to the next one. So so that's pretty cool to hear. Okay. So made the comment about, you know, day zero, but then, you know, touched in on the real time landscape, which is obviously a landscape that Unify Allogene we we believe in as well, which is, you know, we have real time movements built into Unify as well. You know, I think the real time element to one of the exact points you said is, you know, the ability for tellers to focus, the ability to see that transaction come through right after it's been, you know, the taking the picture's been taken on the mobile phone, you know, to land in a review queue, for, you know, a fraud analyst, ATM, ITM, even, you know, arc back to the old days, like a night drop or mail in deposit. But as soon as it hits the back office capture point, that real time element to drop into a review queue immediately, you know, talk a little bit about conversations you have with your clients and customers or what y'all see in the industry about the lift with the real time landscape of getting in the review queue immediately, immediately being challenged versus the the delay aspect. Yeah. You know, and I think that where is where some of the the major excitement with Check Fraud Defender or what I call CFD comes from. It's but, you know, as I mentioned earlier, there's a huge shift for customer experience is always super very important. Right? So the the whole idea behind CFD was let's prevent the fraud from ever hitting or impacting the customer. And we do that through what we call our real time side of the house. So, again, you send us an image. We are going to fully score it against our consortium. So whether it's profiles that your institutions built or, you know, that were built by our consortium, and then we can immediately tell you, typically sub second, hey. This matches or, hey. There there are some things that are concerning here. You need to focus on it. And why that's important is because, like, you know, at the end of the day, if you can prevent the item from ever impacting the customer's account, you know, funds have, like, leaving your bank, you can kind of keep that relationship moving forward. From an impact standpoint, there's a lot of things people don't think about when there's fraud on an account. Usually, you have to close that account. And as we all know, that is one of the biggest pains, just having to redo everything. So if you're able to stop the fraud member hitting the account, you can then kinda not have to worry about things like that. You can kinda keep the customer happy and kinda keep the relationship moving forward. Yeah. Yeah. That that whole having to close out, get a new check card potentially, you know, and especially depending upon, you know, update yet. That's, yeah, that's a pain point that I'm pretty sure all all customers like to avoid. Okay. So, you know, moving from real time, you know, business rules, real time data, you know, talk a little bit about kind of where that fits within, you know, the Mitek world. You talked about, you know, new factors of determination, always looking at different aspect of the checks. What about that, you know, kind of the adding those layers in from the the rules and the real time data? You know, how does that kind of really help drive, you know, that extra step beyond the the image analysis for you guys? Yeah. So I actually my team, we focus on fraud strategy, and we write and own the fraud strategies for probably twelve institutions across the US right now. So that's something so we can kinda see, like, how fraud is moving and changing, but we're also responsible for writing their rules and leveraging all the data. The first step when CFD or check fraud defender receives a check is we actually we do what's called extraction, and that means we lift every single piece of data off the check before we do any fraud scoring. So step one is all of that data is lifted. Step two is the fraud scoring. And then, you know, step three is we return all of those in our results. So not only do you get all these detector scores, you also get all of the data lifted off the check, even if it's handwritten. So who was it written to? What's in the memo line? All of these different pieces of data that you can then go and build your targeted strategies with. Okay. So really taking those elements and with the complete return of multiple, you know, segments, image analysis, scoring, and then here's the overall kind of raw data dump leveraging those fields and that information to then help design and develop rules that fit within their existing policies and procedures and provide the maximum lift that they can get across all three segments then. Yep. Exactly. Yeah. So, you know, we don't return one score or two scores. We return twenty four different indications of, you know, different pieces of the check and how they look as well as who the checks made out to, you know, the date, the amounts, all of that stuff. So everything comes back, which you can then put together and build your your targeted strategy around different fraud types or different scenarios that you're kind of on the eye of, you know, keeping an eye out for. So you're able to kinda leverage all of this data to kind of create a strategy that makes sense for your institution. Okay. That's that's nice because it's you know, I think that's another thing that's a little different. It's a little unique flavor for everybody's a little bit different on that aspect, you know, which is, again, going back to, I think, the success of this partnership and why, you know, we work so well and, you know, this is such a good fit. And, you know, the integration with Unifi, having all deposit channels, having connections for the real time, leveraging, you know, the multipoint analysis, being able to do the review in one single space thanks to the integration versus users having to go to multiple different user interfaces. You know, with UniFi, we're also big on the pattern risk analysis component. Right? What have we seen historically? What fits? What matches? And more to previous point of the conversation, you know, not just high dollar red flags, but really, okay. Well, this is the first time we've ever seen five checks come in for, you know, five different deposits over one hour. You know? So I think at the end of the day, the combination of the two, a lot fits together and works together to really create that platform for the FI. Like you just said, you know, there is a uniqueness for everybody. Everybody has a little bit different flavor, but wanting to be able to provide the data and the technology for review and, you know, fit within policies and procedures. Right? So obviously, faster detection, you know, the manual piece, any delay is a delay that really exposes the potential for, you know, fraud to occur. You know, providing lift for the data coming back, I think, is huge. Right? That's always another one in the fraud space of having to, you know, potentially guess. Like, is this is this or is it is it not? There's always a big question there. You know? And then interactive dashboarding and reporting, to your point, more information that you can provide and have available in the moment is is always big. So we'll have some questions, I think, coming up in just a second. If you could impart one one check fraud Mitek, you know, backed experience, during this webinar for people, for F5s to take away, what what would what would you say to them? It's important you know, it's it's important to move decisions as early as possible. The longer you take to act, the more impact your customer feels. It we and the the lift that we've seen with enabling institutions to share insights has has been huge. And I think, you know, everyone mentions consortium data consortium data, but until you're able to really see an impact and see the lift of of the sharing of consortium data, you don't understand it. And, you know, from what we're seeing so far in in the short couple years that CFD has been around is it has had a huge impact on, you know, in branch check caching that they've never people never had insert insights into before. On us, transit, you know, all of that, it just enables you to catch fraud that you're never gonna catch. So decision early and yes. I buy into the consortium data now. I've seen it. I we use it. So, again, I I you know, I think, again, decision early consortium insights work together. Yeah. I mean, I think I'm right there with you. And and, you know, I think I've I've had a few conversations and done some some fraud analysis studies, and I've pointed out, you know, how much effort is it to do it upfront and get the early decision versus how many steps once it comes back in the return file. How many steps do you have to take then? Are you closing an account to then open account after you've had to, you know, make the client whole again? Was it a policy or a procedure that, you know, had a loophole, had a gap is the reason that it made it through? So now you've had to review that, and you've had to go fix that. So, yeah, I I couldn't agree more. You know, the the earlier you can get involved, the the the better you are because the amount of effort, time, resources spent, you know, once it makes it through is quite significant more than more than you wanna spend. So alright. I think we should have one or two questions, I believe, available. Kara, if you wanna. Yep. Looking through, we have a couple questions here in chat. First one that I see is, what's the best way to prove the value of leveraging a check fraud mitigation tool? Alright, Derek. Sounds like your wheelhouse. Yeah. So, I mean, here at, you know, at Mitek, one way we kind of attack this is we have something we call find the fraud. And it's really you the customer provides the images. They don't tell us what's good, what's bad. We either use our consortium data to score the items and say, okay. Look. This is what we're thinking. These are the scores, or you could provide the the good images as well. You really need to see the results and see the scores and kind of see what you get back to understand. So, you know, it's all about actually getting your hands on the data and really understanding what you can do with it. Yeah. I agree. I'm a big fan of, you know, proof of concepts as long as everybody's, you know, prepared to understand, you know, what it takes because I think it's it's the best way to see you you have your known scenarios that have come through and already happened. And so you can present that opportunity, and you can actually see. And it's like, oh, hey. Well, this would have gotten caught for this reason. But then I also like the fact that, you know, there are occasions where it's like, alright. Well, this actually shows kind of an opportunity over here on a business rule side that you already have available to you today that you're not leveraging in. Because we walked through this, you didn't know that that gap was there. So so, yeah, I I think, yeah, you know, buying the fraud, proof of concepts, I'm always a fan of taking the opportunities to to go and look and see, you know, what what type of results you could have had. So what else, Kara? Yeah. That was a great answer. Let's see. Next one is what is the value add to an FI focusing on prevention versus mitigation? Okay. So that's good. I'll just lean in first and say, you know, again, I think we've mentioned it a few times, the mitigation point, there are a lot more steps there than I think most FIs realize if they count the number of times a fraudulent check came through and the number of times they had to do anywhere from five to ten things. You know, I I think it's just it's it's it's always been a big lift on the operation side to go back and make whole from, you know, a fraudulent check coming through. But, Derek, I'll certainly, you know, again, mitigation point, you know, what what do you think, you know, the strength is within the landscape? Yeah. No. I agree. I I you know, I've circled back multiple times to customer impact. It's it's because, again, you know, at the end of the day, the customers are what are keeping the banks going. Right? So it's about making sure you're protecting your customers, and making sure you're also keeping them around. So if you can prevent it before it happens, you should be good there. Yeah. Fantastic. Anything else, Kara? Great. Yeah. It looks like we just have one more. As fraud strategy leaders, how are you thinking about insider fraud as a function of facilitating check fraud? And what are some best practices you've seen to help shore up those risks? Alright, Derek. That's coming your way. Tell you, buddy. That's a that's a really good one. And and, I mean, I I can say, you know, from a from an insight standpoint, you can definitely start to see and you can start to tell when there's something going on from an insider standpoint just because you'll start to see checks. You know, we've seen banks change thresholds, and then a couple days later, the fraud is also all of a sudden below the threshold. It's like, there's certain insights and things that you can gain from the data if you if you're kind of targeting and looking for it. I I think as fraud continues to evolve and, you know, again, this this social aspect of it between Telegram and and Facebook and things like that, you're always gonna have insiders, and it's start it's gonna become more and more difficult over time. You need to come up with a way of strategy, again, whether it's changing your your thresholds and your rules every few months and then kinda keeping an eye on things. But you kinda need to keep ahead and, you know, with your rules and kinda be strategic with what you're trying to accomplish. Because, again, at the end the day, there's always gonna be insider threat and insider, you know, fraud. So you just kinda need to stay ahead of it. Interesting. That's that's a very interesting question, and that's not it's not one that I hear very often. That's a that's a pretty cool answer to hear. So alright, Kara. So that that was the last one. Seems to be at the moment. Thank you, everyone, for joining us today. If any additional questions have popped up, please reach out to marketingalligent dot com or visit our website. Be sure to check out our events page for all other future webinars if you enjoyed this one. We appreciate your time with us this afternoon and hope you all have a great day. Thanks, everybody. Thanks, Sarah. Thanks, Derek.