Chase check fraud not ‘a glitch,’ expert says
Fraudsters exploited Chase systems during Labor Day Weekend
Chase customers claimed to have identified a glitch in Chase ATMs during Labor Day weekend, allowing them to deposit false checks and withdraw large sums of cash from accounts potentially without the funds to cover the withdrawals.
Last weekend, Chase clients took to TikTok to share “the glitch” in the $3.8 trillion bank’s system.
However, James White, general manager of banking industry at software company Total Expert, told Bank Automation News: “It actually wasn’t a glitch. It is how [Chase’s] system is designed, and people exploited it.”
While fraud was committed, Chase can address two fundamental processes to protect itself, White said.
- The bank must put a hold on checks deposited.
- The bank must confirm the available balances in payors’ accounts.
“Chase must institute temporary holds for “onus” checks [Chase Bank checks] if the available balance does not cover the check amount. They also need to implement the ability to check available balances during the electronic deposit of checks — if they don’t have it already,” White said.
The bank should be able to make hold decisions using automation based on the available funds from the payor’s account, he said.
‘Fraud, plain and simple’
The bank was defrauded and those who committed the fraud “are going to be in a lot of trouble,” White said.
“Depositing a fraudulent check and withdrawing funds from your account is fraud, plain and simple,” a Chase spokesperson told BAN.
In fact, kiting checks is a federal offense and felony charges could be filed, White said.
“I could see Chase taking a hit in public opinion because people see it as a glitch and the bank’s fault,” he said. “The reality is that this action could occur at a lot of banks, and banks rely on the laws in place to protect them.”
Total Expert clients include Canvas Credit Union, Lake Michigan Credit Union and Midwest Bank Centre, according to the company.
The number of Chase clients that committed the fraud is still unknown.
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