Fighting Over the Counter Fraud
Consumer preferences have
shifted toward digital self-service, forcing financial institutions (FIs) to
rethink the role branches play in today’s financial services landscape. Yet
leading banks like Chase view branches as catalysts for economic growth and
vital components of customer engagement. JPMorgan Chase’s internal research
highlights the substantial impact branches have on lending, engagement, and
deposit balances.
Although branch activity
isn’t what it once was, the branch remains far from obsolete. In July, Chase
celebrated the construction of its 1,000th branch since launching its market
expansion initiative in 2018. PNC recently announced plans to double its branch
openings to more than 200 across six states, and Frost Bank has now opened 28
financial centers in the Dallas market.
While financial institutions
are reimagining branch strategy, they are also grappling with operational and
fraud challenges—particularly around over-the-counter (OTC) transactions.
More than half of all fraud occurs during OTC activity, such as cash
withdrawals, money transfers, and check deposits. Checks have become especially
vulnerable, with global check fraud losses predicted to reach $24
billion in 2024. The ability to detect and respond to fraud in real time
reduces both financial loss and the reputational risk of false positives that
can offend legitimate customers.
Types of OTC Fraud Impacting
Financial Institutions
Although paper check usage
has declined due to digital payments and ACH adoption, check fraud remains a
major threat. In fact, 63%
of organizations still report attempted or actual check fraud. Financial
institutions encounter multiple forms of check fraud, including counterfeits,
forgeries, alterations, serial number manipulation, stop payments, and check
kiting.
As banks evolve, so do
fraudsters—employing more sophisticated tactics. Checks are easy to exploit and
are often used for larger transactions such as rent or payroll, making them
attractive targets. Fraudsters also increasingly conduct repeated small-value
transactions that are harder for banks to detect or flag.
Transaction fraud further
compounds the issue, with incidents involving return deposit items (RDIs) and
duplicate deposits through ATMs targeting new, dormant, or closed accounts.
Reducing OTC Fraud Risk
FIs can reduce OTC fraud by
deploying automated, real-time fraud mitigation solutions that support
tellers without requiring them to become fraud analysts. Automation reduces manual
workload and false positives, ensuring faster and more accurate decisions.
Fraud prevention should
begin at the point of disbursement and continue through the clearing process,
supported by automated verification and fraud detection.
For example:
- The fraud detection system evaluates the
check in real time—even for small-dollar amounts often used by fraudsters
to avoid suspicion.
- The system automatically performs deeper
analysis—reviewing account history trend thresholds, prior deposited
items, previous customer behavior, and transaction location.
- If no issues are detected, the teller
proceeds.
- Based on risk level, the system issues
clear guidance: proceed, refer to a supervisor, require a deposit, or
decline the transaction.
- Flagged transactions alert back-office
fraud teams for immediate review.
This integrated process
balances speed, accuracy, and customer experience, protecting both the
institution and the client.
Addressing Compliance and
AML Oversight
In parallel with fraud
detection, financial institutions are strengthening compliance through
automated Anti-Money Laundering (AML) and cash aggregation tools.
Modern AML systems identify
potential money laundering or terrorist financing activity while enforcing due
diligence requirements. Automated cash aggregation tools track reportable
transactions across all branches, triggering alerts for frontline staff when
thresholds are met. These systems automatically generate Currency Transaction
Reports (CTRs), ensuring compliance and reducing manual reporting burdens.
Together, integrated fraud,
AML, and cash aggregation solutions give financial institutions a comprehensive
risk management framework that enhances security, compliance, and customer
trust.
The Bottom Line
By analyzing transactions as
they happen, financial institutions detect OTC fraud instantly instead of
relying on manual reviews. Automated check holds can be applied when required,
helping to reduce financial losses.
In an era where digital and
branch strategies must coexist, automation enables financial institutions to
deliver on both fronts—protecting assets, safeguarding reputations, and
ensuring customers feel valued and secure.
Todd Roberston serves as the SVP at ARGO