Check Imaging Upgrade Could Save Collectors on Fraud

Collection industry executives should be aware of new security features coming to check imaging that will enable them to ensure their collections are not fraudulent, according to Frank Jaffe, president of consulting firm MorSecure in Portland, Maine.

“Check fraud affects businesses on all levels of the economy,” said Jaffee, who will discuss security matters in more detail as part of a panel discussion at next week’s Forward Financial Conference in Chicago.

Check fraud at financial institutions runs anywhere from $650 million to just over $700 million a year, according to financial services industry estimates. Business losses run about nine times higher. Businesses, including collection firms, must also pay fees on returned checks and on returned check images (if they used remote deposit capture rather than accepting and processing a paper check), according to Jaffe.

Bankers, collectors and others that accept checks have questioned the move to check imaging prompted by the adoption of Check 21 in part because the images that replace the physical checks in the settlement process don’t have the same authentication features, for example, check paper stock and water marks.

However, new security features for the check images are starting to come online to answer some of these questions, Jaffe said. The images will include an encrypted bar code or symbol to help trace the check from end to end in the settlement process. The more traceable the image or the paper check, the more likely a forger will be caught.

Additionally, firms and financial institutions are starting to adopt imaging software that helps identify authorized check signatures. “This helps in collecting on the check if the signature is disavowed by the account owner.”