Check Fraud in the Digital Age: Factors of Efficiency and Investigative Procedures

In 2004, the Check Clearing for the 21st Century Act (Check 21) changed the way banks process checks by substituting original paper checks for electronic images and destroying the original documents. With the implementation of Check 21, law enforcement found themselves left with no physical evidence resulting in limited opportunities to investigate check fraud cases. The specific problem addressed in the mixed method research study is the development of suspects in check fraud cases without physical evidence. The purpose of this research was to find reasons for the decrease in the development of suspects in check fraud cases in Central Florida. The researcher feels it is important to examine Check 21 legislation as a possible factor for the decrease in the development of suspects in check fraud cases. The study involved a mixed methods approach involving two concurrent strategies of inquiry to investigate fraud detection problems associated with the transition from paper checks to electronic deposits by the banking industry. Quantitative analysis involved using an independent t-test for statistical analysis of two Central Florida law enforcement agencies to determine whether they have experienced a decrease in the development of suspects in check fraud cases due to check truncation. A qualitative inquiry included in-depth interviews to analyze the perception of fraud investigators representing four law enforcement agencies as well as MIDFLORIDA Credit Union regarding the effect of the digitization of checks on fraud investigations. Due to limited statistical data for the period prior to 2002, it could not be determined that digitization of checks had an impact on the numbers of check fraud cases for which suspects were identified. Qualitative data however did support the theory that digitization of checks has had a negative impact on the development of suspects in check fraud cases. Future recommendations include a greater amount of statistical data be obtained for the period prior to the enactment of Check 21 to accurately evaluate the impact the legislation has had on development of suspects in check fraud cases.