Check 21 Presents Unique Security Challenges for Financial Institutions

Information Security Technology
Managed Services - Outsourcing
Risk Management
Vendor Management

The Check Clearing for the 21st Century Act (Check 21) has created new opportunities for financial institutions and customers. By eliminating the need to transport paper checks, remote check capture can provide significant cost savings for financial institutions. Customers benefit as well: retail customers can receive image proof-of-deposit at an ATM or other remote capture site, and commercial customers can deposit imaged checks directly at their own premises. At the same time, remote check capture carries with it operational risks that left unmitigated could expose a financial institution to fraud losses. According to a 2006 white paper published by the BITS Fraud Reduction Steering Committee, the use of the Internet to transmit check image files could be exploited by criminals. “Remote deposit image files will be open to all the same attacks that online banking or online commerce face. Files could be intercepted on the Internet and either be edited for fraudulent submission or mined for fraud and identity theft.” Information security risks include unauthorized access to and/or use of the imaged information, submission of edited or unauthorized files for clearing, and loss of data. Fortunately, strategies exist for mitigating these risks.

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