Check Fraud Crimes Declining, But Debit Card Crimes on the Rise

As checks become scarcer, criminals have adapted to debit card fraud.

ByABC News
March 27, 2012, 9:53 AM

March 27, 2012— -- During a year that saw a record rise in financial crime reports, one scam that has plagued banks and consumers for decades is fading away: check fraud.

Reports of suspected counterfeiting, check fraud, and check kiting were among the financial crimes that saw declines during 2011, dropping 7.5 percent from 2010.

The drop in check fraud came as the Financial Crime Enforcement Network (FinCEN) had a record number of suspicious activity reports (SARs) in 2011 throughout the financial industry.

The number of check-related suspected crimes peaked in 2008, with banks sending 152,874 suspicious activity reports to FinCEN. From there, the cases are investigated by federal, state, or local authorities, depending on the amount of money involved in the crime.

Since 2008, the number of check-related crimes has dropped to 107,041.

The drop in check fraud numbers points to a trend many Americans are familiar with, the slow disappearance of checks.

The use of checks as a form of payment has been declining in recent years. Personal check use has dropped by 12 percent among consumers between 2008 and 2010, according to the American Bankers Association.

"Many more people pay their bills online today, so there are less checks used in general," said Harry Cendrowski, a fraud and forensics consultant based in Chicago, Ill.

"To the extent that the volume drops, the amount of transactions that would be fraudulent are going to drop," Cendrowski said.

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In dollar amounts, check fraud losses have declined from $1.02 billion in 2008 to $893 million in 2010, according to data from the ABA's 2011 Deposit Account Fraud Survey Report.

Meanwhile, the use of debit cards has increased, and with it, debit card-related crime.

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From 2006 to 2009, the use of debit cards as a form of payment rose 14 percent among Americans, while debit card crimes rose 41 percent, according to data from the Federal Reserve and FinCEN.

"There are more cameras today, so wherever you go, it is so easy to get people's codes. You put in code, I have a camera, I look at it, and I can sell it to everyone I know. And most of the time that's not covered by the bank that issued the debit card," Cendrowski said.

The number of suspected debit card frauds each year is still significantly lower than suspected check crimes, with total debit card fraud accounting for just 6,258 suspicious activity reports from banks in 2011, the highest number of debit crimes ever reported.