That’s the dire warning issued recently by the Financial Crimes Enforcement Network (FinCEN).
FinCEN says the number of Suspicious Activity Reports (SARs) that it received from financial institutions to report potential check fraud nearly doubled last year from its filings the year before.
Last year’s spike in filings on potential check fraud came on the heels of a 23 percent spike in 2021.
Check fraud and other fraudulent activities already are the largest source of illicit proceeds in the United States. In many cases, bad actors use check fraud to launder money and finance terrorism.
Check fraud is a big problem for accounts payable. Seventy percent of organizations experienced check fraud in 2020 – up from 62 percent in 2019, per the Association for Financial Professionals (AFP). The average financial loss from check fraud was $34,000 per organization, AFP found.
Now fraudsters are doubling down on the U.S. Postal Service and its mail carriers. In addition to business checks, fraudsters are stealing personal checks, tax refund checks, and unemployment benefits, Social Security payments and other government assistance payments sent through the mail.
Fraudsters are stealing mail from mailboxes, post offices, and even mail carriers. Once they get their filthy hands on the mail, fraudsters will alter, “wash,” or counterfeit the checks to steal funds.
Some bad actors also use the information contained in stolen mail for future fraud schemes.
FinCEN is working with the United States Postal Inspection Service (USPIS) to help financial institutions detect, prevent, and report suspicious activity connected to mail theft-related check fraud.
But the spike in mail theft-related check fraud should be a wake-up call for businesses that still use checks to pay suppliers. Virtual card payments can help stop these fraudsters in their tracks.
Unlike paper checks, fraudsters cannot intercept virtual card transactions and the card cannot be stolen. A 16-digit virtual card number, three-digit security code, and expiration date gets issued for a specific transaction amount and supplier. When single-use virtual cards are used to make a purchase, if a charge is outside of preset limits, the transaction is declined. After use, the virtual card number and accompanying data instantly becomes invalid, so if the number is stolen, the damage potential is extremely limited. In addition, since the card number gets used for its intended purpose and nothing more, concerns over having a company credit card being used for extraneous items is eliminated.
It’s no wonder that studies find virtual cards experience the least fraud of any payment method.
Fraudsters are relentless. They will continue to find new and more sophisticated ways to defraud businesses. But paying suppliers with virtual cards can help businesses mitigate their risk of fraud.
Looking for ways to mitigate your risk of payment fraud?
Visit CSI Edenred to learn how paying suppliers electronically can help!