Office of the Comptroller of the Currency

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Check Fraud: A Guide to Avoiding Losses

Fraud by Bank Insiders

Often check frauds depend on information provided by bank insiders. In addition to schemes discussed elsewhere, which may involve access to information about one account or relationship, frauds based on insider knowledge are often broader because they are based on knowledge of the bank's operations and access to many accounts.

Example 1: A former bank employee obtains legitimate bank account numbers and uses the numbers with fictitious corporate names to order company payroll checks. He and several cohorts then use false identification to open bank accounts and cash the checks.

Fraud by insiders can be successful when customer account information is not kept secure and if insiders know when checks are read by automatic check processing equipment. Checks processed automatically, unlike those processed manually, are not checked for agreement of MICR information and account information.

To protect against such frauds, banks should:

• check the backgrounds of its employees,
• maintain a separation of functions so that no one person has access to customer account information and customer check stock.