Fighting Over the Counter Fraud
Consumer preferences have shifted toward digital self-service, forcing financial institutions (FIs) to rethink the role branches play in today’s financial services landscape. Yet leading banks like Chase view branches as catalysts for economic growth and vital components of customer engagement. JPMorgan Chase’s internal research highlights the substantial impact branches have on lending, engagement, and deposit balances.
Although branch activity isn’t what it once was, the branch remains far from obsolete. In July, Chase celebrated the construction of its 1,000th branch since launching its market expansion initiative in 2018. PNC recently announced plans to double its branch openings to more than 200 across six states, and Frost Bank has now opened 28 financial centers in the Dallas market.
While financial institutions are reimagining branch strategy, they are also grappling with operational and fraud challenges—particularly around over-the-counter (OTC) transactions. More than half of all fraud occurs during OTC activity, such as cash withdrawals, money transfers, and check deposits. Checks have become especially vulnerable, with global check fraud losses predicted to reach $24 billion in 2024. The ability to detect and respond to fraud in real time reduces both financial loss and the reputational risk of false positives that can offend legitimate customers.
Types of OTC Fraud Impacting Financial Institutions
Although paper check usage has declined due to digital payments and ACH adoption, check fraud remains a major threat. In fact, 63% of organizations still report attempted or actual check fraud. Financial institutions encounter multiple forms of check fraud, including counterfeits, forgeries, alterations, serial number manipulation, stop payments, and check kiting.
As banks evolve, so do fraudsters—employing more sophisticated tactics. Checks are easy to exploit and are often used for larger transactions such as rent or payroll, making them attractive targets. Fraudsters also increasingly conduct repeated small-value transactions that are harder for banks to detect or flag.
Transaction fraud further compounds the issue, with incidents involving return deposit items (RDIs) and duplicate deposits through ATMs targeting new, dormant, or closed accounts.
Reducing OTC Fraud Risk
FIs can reduce OTC fraud by deploying automated, real-time fraud mitigation solutions that support tellers without requiring them to become fraud analysts. Automation reduces manual workload and false positives, ensuring faster and more accurate decisions.
Fraud prevention should begin at the point of disbursement and continue through the clearing process, supported by automated verification and fraud detection.
For example:
- The fraud detection system evaluates the check in real time—even for small-dollar amounts often used by fraudsters to avoid suspicion.
- The system automatically performs deeper analysis—reviewing account history trend thresholds, prior deposited items, previous customer behavior, and transaction location.
- If no issues are detected, the teller proceeds.
- Based on risk level, the system issues clear guidance: proceed, refer to a supervisor, require a deposit, or decline the transaction.
- Flagged transactions alert back-office fraud teams for immediate review.
This integrated process balances speed, accuracy, and customer experience, protecting both the institution and the client.
Addressing Compliance and AML Oversight
In parallel with fraud detection, financial institutions are strengthening compliance through automated Anti-Money Laundering (AML) and cash aggregation tools.
Modern AML systems identify potential money laundering or terrorist financing activity while enforcing due diligence requirements. Automated cash aggregation tools track reportable transactions across all branches, triggering alerts for frontline staff when thresholds are met. These systems automatically generate Currency Transaction Reports (CTRs), ensuring compliance and reducing manual reporting burdens.
Together, integrated fraud, AML, and cash aggregation solutions give financial institutions a comprehensive risk management framework that enhances security, compliance, and customer trust.
The Bottom Line
By analyzing transactions as they happen, financial institutions detect OTC fraud instantly instead of relying on manual reviews. Automated check holds can be applied when required, helping to reduce financial losses.
In an era where digital and branch strategies must coexist, automation enables financial institutions to deliver on both fronts—protecting assets, safeguarding reputations, and ensuring customers feel valued and secure.
Todd Roberston serves as the SVP at ARGO