In the Continuous Struggle Against Check Fraud, a New Tool Offers Insight

In the ongoing struggle to combat check fraud, a recent advancement could address an often-neglected area of risk.
ParaScript, a provider of AI-driven document processing services, has introduced a feature that detects, reads, and interprets handwritten or stamped endorsements on the back of checks.

The update to ParaScript’s check recognition solution, CheckXpert.AI, allows the system to recognize phrases such as “For mobile deposit only” or “Deposit only to account of payee.” It automatically identifies the orientation of the check and matches the text against a customizable list of authorized statements. Endorsements that are missing, suspicious, or unauthorized are promptly flagged.

This enhancement ensures checks are deposited through legitimate channels and minimizes fraud risk. However, it’s important to note that this tool does not verify handwriting authenticity or match signatures against records, as some other investigative tools can do.

A Practical Solution

The automation of a task frequently causing problems in remote deposits—endorsement verification—is seen as a significant benefit.

“Most fraud tools concentrate on signatures or altered fields, whereas this fills a smaller but critical gap by ensuring the back of the check matches expected text,” commented Jennifer Pitt, Senior Analyst of Fraud Management at Javelin Strategy & Research. “It operates in real time, meaning issues can be identified before the deposit is accepted, reducing later manual review.”

“It’s not a major leap in handwriting analysis but offers practical benefits,” she added. “Especially for banks handling high volumes of deposits or facing stringent compliance standards, it helps reduce manual scrutiny and enforces basic controls more consistently.”

Advancements in AI for Fraud Detection

Artificial intelligence is becoming an essential tool in the fight against check fraud. The federal government remains a significant user of paper checks, with 23% of benefit recipients receiving payments through this method. The U.S. Treasury has been leveraging AI to detect and prevent check fraud with considerable success.

According to CNN reports, machine learning technology helped the Treasury recover $1 billion in check fraud during fiscal year 2024—a substantial increase from the previous year’s recovery of approximately $357 million. Banks issue nearly 700,000 reports on check fraud annually.

Despite these advancements, many organizations are not adequately addressing this type of crime. Only 22% of companies surveyed by Javelin Strategy & Research use check fraud detection solutions.