Florida Banking July 2024

TRUST AND WEALTH MANAGEMENT

ADDRESSING THE NIGHTMARE OF CHECK FRAUD IN THE TRUST INDUSTRY

BY KENNETH D. PRATT, FBA SENIOR VICE PRESIDENT OF GOVERNMENT AFFAIRS

P icture this… Operations at your trust company are going smoothly. Your trust officers are meeting their internal goals. Your managers have set up your shop to be a well-oiled machine. Even your clients are showing their appreciation for the services you and your trust company provide. All generally seems right in your trust management part of the world…. And then the shoe drops…. [Ring!]

trustworthy to continue to do business with. This nightmare scenario [slightly adapted for dramatic purposes] and many other similar scenarios are waking up trust companies in our state and all across our country to the rising concerns surrounding checking financial fraud. The stealing and washing of checks has been steadily on the rise in the United States, causing the Financial Crimes Network (FinCEN) to issue a nationwide advisory last year, placing financial institutions on high alert regarding

At 8 a.m., you get an urgent call from one of your best clients who was just denied access to teeing off at his country club because their membership has not been paid. And the admonishment happened in front of his golf buddies! Right now, your client is NOT happy. You quickly drive to the office and find proof that the client’s check was presented to the bank and cashed. But the country club maintains they never received payment. After following up with the bank, you

the surge in check fraud mail schemes. FinCEN Alert on Nationwide Surge in Mail Theft-Related Check Fraud Schemes Targeting the U.S. Mail was issued on February 27, 2023. In its advisory, FinCEN reports that despite fewer checks being used as payment devices, SARS reported check fraud has been growing since 2021 (350,000), and that number of reports almost doubled in 2022 (680,000). For several reasons, trust companies are particularly

“THE STEALING AND WASHING OF CHECKS HAS BEEN STEADILY ON THE RISE IN THE UNITED STATES, CAUSING THE FINANCIAL CRIMES NETWORK (FINCEN) TO ISSUE A NATIONWIDE ADVISORY LAST YEAR.”

more at risk of the dangers of check stealing. Trust companies are often responsible for the financial task of delivering the payor’s payment to the authorized payee — putting them in the direct line of fire. Trust companies are also uniquely impacted because, whenever a payment problem arises, the trust company is often the client’s first call. It is often in a trust company's best interest to essentially drop everything to make sure the issue is quickly remedied. FinCEN also reported that criminals are more focused

discover that not only has this check been stolen and washed, but all of your client’s monthly bills that have been paid with checks have been stolen — from the Post Office. Working alongside the FBI for several months, you discover that your client’s checks were washed and presented by a financial “mule” who presented fake identification and cashed the checks for a fee for the real criminals. You were thankfully able to recoup all of your client’s funds and convince him that you’re still

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