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How Texas National Bank Fought Check Fraud—and Won: Inside a $300,000 Bank Fraud Turnaround

ByInnoVirtuoso

Check fraud isn’t a relic of the past—it’s a growing threat that can strike any community bank, business, or individual. In fact, cases of check fraud doubled in the U.S. from 2021 to 2022, according to the Financial Crimes Enforcement Network (FinCEN). But while headlines often focus on devastating losses, there’s another side to the story: resilience, innovation, and victory.

In the heart of Texas, one community bank—Texas National Bank—managed to stem the tide. How did they turn a six-figure fraud scare into a $300,000 prevention success within months? And, more importantly, what can other banks, businesses, and consumers learn from their layered approach?

Let’s dive deep into the real-world playbook Texas National Bank used to stop check fraud cold—and why their example matters now more than ever.

The Rising Tide of Check Fraud: Why It’s Everyone’s Problem

If you think check fraud is “old news,” think again. As digital convenience grows, so do the methods of fraudsters. In 2022, fraudsters became bolder and more sophisticated, exploiting both human error and outdated systems. Texas National Bank, a trusted nine-branch institution in Edinburg, Texas, was among the many victims.

Here’s what happened:

  • A customer’s checks were stolen in the mail.
  • Thieves altered and circulated the checks nationwide.
  • $143,000 worth of fraudulent checks cleared before detection.

The incident could have ended in disaster. Instead, it became a catalyst for change.

Why Mail Theft and Check Fraud Are Surging

Mail theft—a centuries-old crime—has taken on high-tech dimensions. Criminals now steal checks, alter payee details, and cash them at banks across the country. Why is this on the rise?

  • Remote deposit capture makes it easier to deposit altered checks from anywhere.
  • Dark web forums facilitate the sale and trade of stolen checks and personal data.
  • Manual fraud detection at many banks can’t keep up with the scale and speed of attacks.

Here’s why that matters: Even if you’re vigilant, your bank’s processes are your last line of defense. What comes next is crucial.

From Crisis to Overhaul: The Birth of a New Fraud Department

When Texas National Bank discovered the fraud, Chief Risk and Compliance Officer Stephen Wager took swift action. Although the bank recovered the lost funds through warranty claims, the experience was a wake-up call.

“That’s when our fraud department was born overnight,” Wager recalls.

Previously, fraud prevention was handled by the compliance and risk team—mostly through painstaking manual review. Staff reviewed 150 to 200 checks a day, focusing on those over $5,000. As fraud surged, this approach was no longer sustainable.

The Problem With Manual Review

Manual detection methods are:

  • Time-consuming: Staff can’t examine thousands of checks in detail.
  • Inconsistent: Human error is inevitable, especially under pressure.
  • Reactive, not proactive: Fraud is often caught after the fact.

Let me explain: In today’s high-volume, high-speed banking environment, relying solely on people is like trying to stop a flood with a mop. Automation and smarter tools are no longer optional—they’re essential.

Building a Modern Anti-Fraud Arsenal: From Positive Pay to AI

Texas National Bank knew they needed more than a quick fix—they needed a layered, “fraud onion” approach. Here’s how they built out their toolbox:

1. Leveraging Positive Pay for Proactive Protection

Positive Pay is a classic but powerful tool. This system, offered through the bank’s Fiserv core processing platform, matches each check or ACH transaction against a list of checks authorized by the customer.

  • How it works: If the details don’t match, the system automatically texts the customer for approval.
  • Why it’s effective: It stops unauthorized checks before they clear, putting the power in the customer’s hands.

But here’s the catch: Positive Pay is great for protecting the check writer (the payor). It doesn’t help if you’re cashing a check—leaving payees vulnerable.

2. Adding Cyber Intelligence with Q6 Cyber

Next, Wager’s team implemented Q6 Cyber, a cutting-edge e-crime intelligence platform. Q6 monitors online communities, dark web forums, and botnets for threats related to bank accounts and personal data.

  • What it does: Sends alerts about emerging cyber threats targeting customers or the bank.
  • Why it matters: It offers proactive (not just reactive) protection, helping the bank stay ahead of fraud trends.

While Q6 hadn’t caught anything major yet, it’s like insurance: you hope you never need it, but you’re glad it’s there.

3. AI-Powered Check Fraud Detection with Abrigo Fraud Detection (AFD)

Perhaps the most significant upgrade was activating Abrigo Fraud Detection (AFD)—an AI-driven, rules-based system built for modern check fraud.

How Does AFD Work?

  • AI analyzes every check image (around 1,900 daily at Texas National Bank).
  • Examines 23+ data points including check borders, fonts, name boxes, and even signatures.
  • Flagged checks (about 60 per day) trigger immediate texts to customers for confirmation.
  • Machine learning improves accuracy with every fraud attempt.

Why this is a game-changer: AFD caught more than $300,000 in attempted fraud within its first few months. The system doesn’t just spot anomalies—it learns and adapts to ever-changing fraud tactics.

Expert insight: As Divya Baranawal, VP and principal analyst for financial crime at QKS Group, explains:

“AI can process massive amounts of data quickly, identify complex fraud patterns, and reduce false positives. As these systems learn from each fraud attempt, they become more accurate and effective over time.”

4. Collaboration and Information Sharing: The Texas Bankers Association

Fraudsters don’t work in silos—and neither should banks. Texas National Bank joined the Texas Bankers Association’s Information Sharing and Collaboration Center, gaining access to:

  • Cyber-governance frameworks
  • Transaction monitoring tools
  • Fraud detection resources
  • Splunk intelligence management platform for faster investigations

By sharing data like suspicious domains, debit card BINs, or corporate emails, banks can warn each other instantly—reducing time to response.

The Power of Layered Security: Why One Tool Isn’t Enough

Every security expert will tell you: there’s no silver bullet. Texas National Bank’s approach—building a “fraud onion” with multiple, overlapping layers—drastically reduces risk.

Here’s a quick breakdown of their anti-fraud layers:

  1. Positive Pay: Stops fraudulent checks for check writers.
  2. Q6 Cyber: Proactively monitors digital threats.
  3. Abrigo Fraud Detection (AFD): Analyzes every check with AI.
  4. Texas Bankers Association: Enables industry-wide alerts and collaboration.
  5. Splunk platform: Prioritizes and accelerates incident response.

Why does this work? If a fraudster gets past one layer, the next one stands ready. It’s defense in depth—just like a well-guarded castle.

Innovations on the Horizon: Real-Time Detection and Nationwide Data Sharing

The fight against fraud is always evolving. Texas National Bank isn’t standing still—they’re currently beta testing new AFD features to detect fraud on deposited checks written to their customers from other banks.

How the New System Works

  • AI and machine learning analyze deposited check images—catching forgeries and alterations.
  • Nationwide check image consortium: Banks pool data on known fraudulent checks (powered by Mitek’s Check Fraud Defender database).
  • Integrated fraud alerts: If a customer tries to deposit a known bad check, the bank can stop it cold.

Here’s why that matters: As the banking industry shares more data and leverages smarter technology, fraudsters lose their main advantage—anonymity and speed.

Moving Toward Real-Time Fraud Detection

Today, many systems (including Texas National Bank’s) process transactions in batches. That’s a vulnerability—fraud can be detected only after the fact.

Wager hopes to integrate real-time notifications as soon as a check is scanned, further reducing losses. The tech is close—but depends on core banking systems evolving to share data instantly.

What Businesses and Consumers Can Learn from Texas National Bank

The Texas National Bank story isn’t just for bankers. Fraud touches everyone, and their approach offers valuable lessons:

For Banks and Credit Unions

  • Don’t rely on manual review alone; it’s not scalable.
  • Invest in layered, AI-driven tools for both payor and payee protection.
  • Join industry collaboration networks to stay ahead of emerging threats.
  • Continuously test and update fraud detection systems.

For Businesses

  • Use Positive Pay or similar services for every business checking account.
  • Educate your staff about the risks of mailing checks—and consider secure alternatives.
  • Scrutinize your bank’s fraud detection offerings. Don’t be afraid to ask tough questions.

For Consumers

  • Monitor your accounts regularly. Don’t assume your bank or credit union will catch everything.
  • Ask your bank about their fraud prevention tools. Are they using AI? Real-time alerts?
  • Report any suspicious activity immediately. Quick action is critical to recovering funds.

Frequently Asked Questions (FAQ)

How does Positive Pay prevent check fraud?

Positive Pay matches checks presented for payment against a list of checks issued by the account holder. If details (such as amount or payee) don’t match, the bank alerts the customer for approval, stopping altered or counterfeit checks before they clear.

What is Abrigo Fraud Detection (AFD) and how does it work?

Abrigo Fraud Detection (AFD) is an AI-powered system that analyzes check images for signs of fraud. It examines multiple data points—like font, borders, and signatures—flagging suspicious transactions in real-time and notifying customers for verification.

Why is check fraud on the rise in the U.S.?

Experts cite several reasons: – More checks in the mail due to pandemic-era habits. – Increased sophistication of fraudsters using digital tools. – Gaps in traditional, manual fraud detection methods. – Stolen checks are easily altered and sold online.

For more, see FinCEN’s report on rising check fraud.

How can I protect my business from check fraud?

  • Implement Positive Pay or similar tools.
  • Avoid mailing checks when possible—use secure payment platforms.
  • Work with your bank to enable real-time alerts and strong account monitoring.

For more on business check fraud prevention, visit the American Bankers Association’s resources.

What should I do if I suspect check fraud on my account?

  • Contact your bank immediately.
  • Review recent transactions for any unauthorized activity.
  • File a police report if checks were stolen.
  • Monitor your credit and account statements for ongoing issues.

The Big Takeaway: Layered Defense Is Your Best Bet Against Fraud

Texas National Bank’s journey is a testament to what’s possible when a community bank refuses to be a victim. Their “fraud onion” approach—leveraging automation, AI, real-time alerts, and collaborative intelligence—turned a $143,000 fraud event into a $300,000+ prevention win.

The lesson for all of us? Fraud is relentless, but so is innovation. Whether you’re a banker, business owner, or everyday consumer, demanding smarter protection is not just wise—it’s necessary.

Want to stay ahead of the latest security insights and practical fraud prevention tips? Subscribe to our updates or check back for more expert advice on safeguarding your finances in an ever-changing world.

External resources for further reading:

Stay informed. Stay protected. And remember—when it comes to check fraud, the best defense is a smart, layered offense.

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InnoVirtuoso

Hello there! I'm passionate content writer navigating the digital landscape. With a deep love for words and an insatiable curiosity about technology.

With 10 years of experience in IT field, I write mostly about emerging tech, sharing news, informational articles and covering other topics I find interesting.

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