Risks Associated with Remote Deposit Capture

The usage of remote deposit capture has been increasing rapidly in the recent past. This is because the technology is convenient and also because check processing became very difficult during the lockdowns which were induced by the coronavirus pandemic. As a result, corporations were forced to deploy remote deposit capture machines in order to continue to run their processes.

In fact, the coronavirus pandemic has ensured that banks make the remote deposit capture feature available for retail customers as well. In many parts of the developing world, retail customers can also deposit their checks and encash them by simply taking a picture of the same.

In the previous article, we have studied about the working of the process as well as its benefits. However, it would be wrong to say that the remote deposit capture process is without any risks. There are some significant risks which are associated with this process. In this article, we will have a closer look at some of the most obvious risks which are associated with the remote deposit capture process.

• Higher Chance of Frauds: The first and most obvious problem with the remote deposit capture process is that there is a higher probability of fraud when people use this process. There are various types of frauds that are associated with this process. Some of the prominent ones have been mentioned below:

  1. Redeposit: When checks are electronically deposited using remote deposit capture, the original check still remains with the corporate customer. In many cases, these checks are not properly destroyed. Hence, these checks are sometimes redeposited by the customers inadvertently.

     However, banks are very diligent about fraud. Hence, they have systems in place to detect such fraudulent redeposits. Banks lay down significant penalties for such redeposits. This is done to deter fraudulent attempts. Hence, the administrative error of a few clerks can cost the company a lot of money in terms of charges and fees.

  2. Counterfeits: The technology available to banks is quite cutting edge. However, at the same time, the banks still have limitations when it comes to examining the check. The banks can do a better job of physically examining the check, for authenticity, as compared to electronically examining one.

     There are many fraudulent people who are aware of advanced digital techniques with which they can create counterfeit checks which appear just like an original on a scanned copy. This may be done by the staff of the corporate customer while trying to embezzle money.

  3. Alteration of Data: In many cases, the remote deposit capture machine captures the data from the check using optical character recognition technology. However, this data is then available to the user at the customer site as well as at the bank’s end for alteration. It is quite possible that wrong data may be entered either deliberately or because of clerical errors. In either case, it is likely that more or less money will be deducted from the customer’s account. Also, the mere fact that data can be altered makes the process riskier.

  4. Identity Frauds: Lastly, the checks which have been encashed need to be disposed off properly. If the company does not have the proper processes in place to dispose-off checks, then it can expose the company to a host of fraud risks. This is because sensitive information such as bank account numbers are printed on the checks. The illicit sharing of this information can expose the company to a wide variety of identity frauds.

• Check Rejections: When it comes to remote deposit capture, the banks have a very high requirement for image clarity. There are industry-wide standards that need to be followed to ensure that the images captured are clear and easy for the machines to read. However, in many cases, when the machines become old, their accuracy and clarity decrease. As a result, the images captured do not meet the quality standards. In such cases, the checks do get immediately processed but are canceled by the banks at a later stage. Such check rejections can be quite difficult to track. If the corporate customer is not able to track the rejected checks, they may have a difficult time reconciling the checks with their books of accounts.

• Insurance Coverage: Lastly, since remote deposit capture processes are so vulnerable to fraud, they impact the insurance needs of the organization.

  Corporate customers have to be sure whether their insurance covers the liability which may arise from frauds related to remote deposit capture. Sometimes, insurance companies may not cover the loss and in such cases, companies may have to purchase additional insurance. Commercial banks themselves are able to help customers meet their insurance needs. However, it is important for the customers to be aware of such risks.

In modern times, most commercial banks have been able to mitigate the various risks which arise due to the remote deposit capture technology.

Hence, remote deposit capture is generally viewed as being a safe mechanism to expedite the cash flow of a company. This is the reason that corporations all over the world are not paying attention to the risks but instead to the benefits of remote deposit capture. This is evident from the high rate at which this technological advancement is being adopted by various corporations across the globe.