FinCEN warns financial institutions about a surge in check fraud linked to mail thefts.
April 06, 2023
The Financial Crimes Enforcement Network (FinCEN) released an alert on February 27th to financial institutions to remain vigilant in identifying and reporting check fraud schemes that target the U.S. mail.
These fraudulent activities are commonly referred to as "mail theft-related check fraud," where checks stolen from the U.S. mail are fraudulently negotiated. Check fraud, along with other types of scam, represents the largest source of illicit proceeds in the United States, and as noted in the U.S. Department of the Treasury's National Money Laundering Risk Assessment and National Strategy for Combatting Terrorist and other Illicit Financing, is a significant money laundering threat to the country.
The primary objective of the alert is to ensure that financial institutions submit suspicious activity reports (SARs) that accurately identify and report any suspected check fraud schemes that could be linked to mail theft. The alert has highlighted specific red flags to aid in identifying and reporting suspicious activity. Financial institutions were reminded of their Bank Secrecy Act (BSA) reporting obligations. Over the last three years, BSA reporting for check fraud has shown a significant increase, with over 350,000 SARs filed in 2021, representing a 23 percent increase from the previous year. Additionally, in 2022, SARs related to check fraud surpassed 680,000. In the event of suspected this type of fraud, financial institutions are advised to refer customers to the United States Postal Inspection Service, as well as submit a SAR.
Financial Red Flags Relating to Mail Theft-Related Check Fraud
1. FinCEN and USPIS have collaborated to identify red flags for financial institutions to detect and report suspicious activity related to mail theft-related check fraud.
2. Large withdrawals via check to a new payee from an account with no history of such activity
3. Customer complaints of checks stolen from the mail and deposited into an unknown account
4. Customer complaints of a mailed check not received by the intended recipient
5. Withdrawals with the use of checks that appear different from those used for legitimate transactions.
6. Sudden check deposits by an existing customer with no history of such deposits, followed by withdrawals or transfers of funds
7. Non-characteristic, abnormal check deposits followed by rapid withdrawals or transfers of funds
8. Overwriting of original handwriting with faded handwriting on suspect checks
9. Indicators of other suspicious activity, such as pandemic-related fraud, in suspect accounts
10. New accounts opened for check deposits, followed by frequent withdrawals and fund transfers.
11. Non-customer attempting to cash extensive checks in person with a suspicious or potentially indicative explanation of money mule activity.
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Source: FinCEN (2023, February 27). FinCEN Alert on Nationwide Surge in Mail Theft-Related Check Fraud Schemes Targeting the U.S. Mail. https://www.fincen.gov/sites/default/files/shared/FinCEN%20Alert%20Mail%20Theft-Related%20Check%20Fraud%20FINAL%20508.pdf