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Monday, April 24, 2017

Renewed interest in money order fraud

What’s old is new again, even in payments. A pair of indictments handed down this month by the Brooklyn District Attorney, in New York City, shows fraudsters are still attracted to check scams. The two indictments allege fraud involving money order transactions totaling close to a half million dollars over the course of several years.

The alleged fraudsters, nine in all, are accused of taking advantage of recent innovations, like mobile check deposit, and availability schedules that can, at times, provide customers with access to funds from deposits before deposited items are deemed fraudulent.

Face amounts altered

One indictment alleges that two Brooklyn residents undertook a rather traditional fraud. The two are accused of depositing forged and doctored money orders (issued by the U.S. Postal Service and Western Union) totaling over $375,000 at local branches of Bank of America, Citibank and TD Bank between 2013 and 2017. Some of the doctored money orders were also cashed at local check cashing establishments. The original face amounts were between $1 and $6, but were altered to reflect face values of $1,000, according to the indictment. “These defendants allegedly carried out an elaborate scheme to systematically steal hundreds of thousands of dollar,” Acting District Attorney Eric Gonzalez said in an April 20, 2017, statement about the indictments. “Financial crimes of this scale not only hurt our banks – they undermine the public’s trust in institutions we all rely upon for our livelihoods and our economy.”

Mobile deposits multiplied

The other indictment alleges seven Brooklyn residents took advantage of mobile deposit options to deposit the same forged postal money orders into multiple bank accounts, withdraw those funds as soon as possible, and then cash the paper items at local USPS locations. The scam is alleged to have involved more than 150 money order deposits and over $100,000 in losses.

The indictment, handed down on April 13, alleges the seven defendants enticed 47 people with accounts at TD Bank, Santander and Bancorp to relinquish control of those accounts (including debit cards and PINs) for a promised sum of money. Then they allegedly purchased postal money orders for amounts ranging from $700 to $12,000 to carry out the scam, which involved depositing the same items into multiple accounts using smartphones.

“Mobile check deposit schemes are one of many fraud schemes gaining popularity in recent yearsm” said U.S. Postal Inspector in Charge Philip R. Bartlett. “These schemes present a real challenge for financial institutions and law enforcement.” Bartlett’s office led the investigation that resulted in the seven being indicted.

Risks analyzed

A 2016 report by Guardian Analytics revealed that 72 percent of mobile banking fraud involves mobile deposits. The trend is particularly concerning given the growing availability of mobile deposit, as both the number of banks offering and number of consumers using mobile deposit have been charting double-digit growth rates, the report stated.

However, a study last year by RemoteDepositCapture.com found problems with and losses from so-called “duplicate deposits” are minimal and isolated. Only 25 percent of banks and credit unions surveyed by the remote deposit capture (RDC)-centric website reported losses from duplicate deposits. What’s more, better than half of those that did incur losses (51 percent) said the losses fell within their risk tolerance levels, so they made no changes to procedures as a result.

“Most FIs see RDC as a homerun,” said John Leekley, founder and Chief Executive Officer of RemoteDepositCapture.com. “Better than 90 percent of those surveyed said the benefits of mobile RDC outweigh the costs and risks, while 52 percent indicated the benefits far outweigh the costs and risks.” end of article

Editor's Note:

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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