Insights Thought Leadership

Getting More Positive About Fraud Prevention

Getting more positive about fraud prevention



The Association for Financial Professionals’ 2018 Fraud and Control Survey revealed that 78% of responding companies experienced check fraud in the prior year- the highest rate on record. Even with check volumes declining overall, fraudsters see continuing opportunity for malfeasance in this channel- particularly in business accounts, where they believe larger-value unauthorized items could skate through unnoticed.

Such challenges call for automated fraud detection solutions to minimize losses while also maximizing customer satisfaction. Let’s consider how automated payment verification can be accomplished. 

 More Attempts, More Headaches

First off, there’s no longer reason to treat checks as a channel unto themselves. With the vast majority of checks these days being processed as digitized images, the line between paper and electronic items has essentially blurred. The volume of ACH transactions now exceeds checks, and requires similar screening. It makes sense to tackle the two streams in tandem.

“Positive Pay” is an effective method of fraud detection of thwart attempts on corporate accounts. With this product, corporate clients submit a daily file to their financial institution providing key information (e.g., check number, amount, date) for recent payments issued. The FI then compares incoming items against the data in this file, flagging any discrepancies for further interrogation before they are honored.

Not all positive pay programs are created equally, though. For instance, some (such as ARGO’s SAND offering) also allow clients to include payee names in the daily file, providing a further level of fraud prevention against altered checks. A robust system can also harmonize ACH transactions in the same workflow, reducing back office effort. Alas, no system is foolproof- although it may be possible to eradicate unauthorized items, there will always be exceptions requiring human intervention. The challenge is to keep such events to a minimum.          

The Dreaded False Positives

The need for manual review may arise because a check image wasn’t clear enough to facilitate a match, or because other telltale signs warrant additional attention- F.I.’s can customize tolerance levels for these factors to optimize the risk/operations tradeoff.

Such additional scrutiny is a necessary part of the process, but of course adds to FI cost- or worse, causes a negative client experience if a legitimate item is rejected. Fortunately, those making decisions on whether to honor check and ACH payments have the luxury of time as compared to card processors, who must make approve/deny calls in nanoseconds while a customer stands waiting.  

A robust fraud detection system like ARGO’s SAND solution can drive this false positive ratio below 5%. This translates to significant back office savings, a more seamless client experience, and quite possibly increased sales of payment verification offerings by the bank’s Treasury Management team. With no letup to payments fraud in sight, institutions of all sizes should confirm they are addressing this challenge in the most effective manner.

For more information on how to improve fraud prevention for your organization, download our SAND business case.

Download SAND Business Case