Trends in Suspicious Activity Reports Involving Convenience Checks
Credit card checks, also known as convenience checks or courtesy checks, are issued through a credit card company and linked to a credit card account. Customers find credit card checks convenient for use with merchants that do not accept credit cards, but do take checks. Credit card checks may be mailed to customers without the customer?s request. They do not require activation, thereby creating a heightened risk for identity theft by providing thieves an opportunity to gain access to customer?s information by simply stealing their mail. The thief only needs to sign the customer?s name on the face of the check and present it to any merchant. Customers may first learn of the identity theft when reviewing their credit card bills.1
FinCEN conducted an assessment of Suspicious Activity Reports (SARs) filed during the period April 1, 1996 to March 31, 2007 with narratives containing three key search terms: ?credit card checks?, ?convenience checks,? and ?courtesy checks.? The Bank Secrecy Act (BSA) database search produced 14,816 SARs. The reports can be broken down as follows:
- Depository Institutions filed: 14,670
- Money Services Businesses filed: 70
- Casinos and Card Clubs filed: 7
- Securities and Futures Industries filed: 69
Depository institution SARs showed the top 5 reasons for filing of suspicious activity2 as:
- Check Fraud 7,158 (30.61%)
- Credit Card Fraud 6,933 (29.64%)
- Other 3,299 (14.11%)
- Identity Theft 1,887 (8.07%)
- BSA/Structuring/Money Laundering 1,361 (5.82%)
Check fraud involved stolen convenience checks endorsed and deposited for illegal gain. Credit card fraud involved credit card ?bust-out? schemes where the subjects opened credit accounts and quickly reached the credit limit. The subject then paid with a fraudulent convenience check to restore the credit balance and spent the limit again.
Two hundred and ninety-nine reports indicated check fraud and identity theft and described activity where the accounts were established using the victims? names without their knowledge. In some cases subjects used their parents? identities, and in other cases subjects used the identities of deceased persons to establish credit card accounts.
BSA/Structuring/Money Laundering violations involved activities in which the subjects structured deposits and withdrawals of convenience, credit card, and courtesy checks. As soon as the funds were available, the suspect withdrew the funds, wrote checks, and made purchases. The financial institution sustained financial loss when the checks were later returned for insufficient funds.
1 A convenience check may be tied to a credit card account, but it does not give a customer the same kind of consumer protection as a credit card. Regulation Z in the Truth in Lending Act (TILA), effective April 1, 2004, offers certain consumer protections for credit transactions. Currently, a convenience check is not treated as a credit card under Regulation Z because it can be used only once and not ?from time to time? as a single transaction. For more information on Regulation Z go to: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040326/attach...
2 Some SARs may list multiple suspicious activities.
Excerpted from SAR Activity Review Issue 12, page 5
First published on 10/01/2007