Office of the Comptroller of the Currency

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Check Fraud: A Guide to Avoiding Losses

Identity Assumption

Identity assumption in check fraud occurs when criminals learn information about a bank customer, such as name, address, bank account number, account balance, social security number, home and work telephone numbers, or employer, and use the information to misrepresent themselves as the valid bank customer. These schemes may involve changing account information, creating fictitious transactions between unsuspecting parties, or preparing checks drawn on the valid account and that are presented using false identification.

This fraud is made easier when organizations, such as state departments of motor vehicles use social security numbers on identification. In such states, because those numbers are more available, banks must be especially careful.

Example 1: A bank customer pays a bill in the normal course of business. An employee of the payee then copies the check and provides it to a partner in crime who contacts the bank and, using information from the check, pretends to be the account holder. The criminal tells the bank that he or she has moved and needs new checks sent to the new address as quickly as possible. When the bank complies, the forged checks are written against the customer's account.

Example 2: A gang member steals a statement for an account at Bank A and another steals a box of new checks for a different person's account at Bank B. The gang then prepares the stolen checks to be payable to the valid account at Bank A. Using fraudulent identification, one of the criminals then poses as the payee to cash the checks at drive-through windows at Bank A. Because the criminals know there is sufficient cash in the account to cover the check, they can safely ask for immediate cash.

Example 3: A criminal uses customer information, sometimes from a bank insider, to order checks from a check printer, or to create counterfeit checks, and to create false identification. The criminal then writes fraudulent checks and presents them for deposit into the customer's account, requesting part of the deposit back in cash. The cash-out from the transaction represents the proceeds of the crime.

Identity assumption schemes can be successful when a bank:

• accepts account changes over the telephone,
• is not careful in requiring and reviewing identification presented for cash-out transactions,
• has no limit on the size of cash transactions, especially at temporary or remote locations such as drive-through windows.

To protect against such frauds, banks should:

• ensure that changes to accounts are secure, by requiring customers to request changes in writing or in some other way that guarantees the identity of the customer.
• limit the size of cash transactions at temporary or remote locations to require individuals presenting large items to complete the transaction in a regular bank office.
• train personnel, including all tellers, to:

– check identification carefully, particularly in split/deposit transactions,
– require two forms of identification, and
– record the identification information on the back of the item presented,
– inspect checks carefully to ensure that they are not counterfeit
– such checks are often printed on lower quality paper, which tends to feel slippery, or are produced using desktop publishing equipment, which smudges when rubbed with a moist finger.

Next: Closed Account Fraud
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