Frank Takes: How Banks Solved the Check Fraud Boom of the 1970s 

Frank Takes is a quick summary of insights and findings from the popular industry blog Frank on Fraud, written by renowned fraud expert Frank McKenna, co-founder and Chief Fraud Strategist at Point Predictive. 

Fraud history often repeats itself, and the 1970s serve as a prime example of this phenomenon. Amidst economic recession and inflation, the US saw a surge in check fraud, which became a significant issue for banks and law enforcement. 

Explosion of Fraud in the Seventies 

By 1976, check fraud had reached $4 billion in the US, a figure equivalent to over $30 billion today (Source: https://www.usinflationcalculator.com/). This fraud boom overwhelmed the FBI and became the most prevalent type of fraud during that period. 

Technological Innovations in New York 

In response, banks in New York began adopting new technologies by July 1977. One notable solution was the Touch Signature device, which collected thumbprints on checks without messy ink, serving as an effective psychological deterrent to fraudsters. 

Continued Challenges 

Despite these innovations, check fraud did not disappear. It continued to rise, peaking in the mid-1990s with estimated losses between $10 billion and $50 billion annually. Various technologies like EWS, Positive Pay, and Chex Systems were introduced to combat the problem, achieving partial success. 

Resurgence of Check Fraud 

Check fraud declined as check usage decreased but began to rise again around 2015 with new scams. Today, the issue persists, with results from the 2023 AFP Payments Fraud and Control survey finding that checks continued to be the payment method impacted most often by fraud activity; sixty-three percent of respondents stated that their organizations faced fraud activity via checks, illustrating the cyclical nature of fraud challenges. 

Please note that any opinions expressed in this piece are solely those of the individual author and do not necessarily reflect the views or opinions of the company. For the full article, visit Frank on Fraud.