Regulatory oversight has forced banks such as Citigroup Inc and HSBC Holdings Plc to hire more staff, conduct reviews and invest in better technology to identify suspect transactions and bolster their defenses against abuses of financial systems, including electronic check processing.
The chief concern: Weaknesses in check clearing. Banks accept massive numbers of scanned checks that are more difficult than wire transactions to screen for suspicious activity.
It also is easier for banks to mine data in wire transactions for suspect activity than imaged checks because information can more easily be extracted from wires.
In recent years, banks and customers have used electronic images of checks to process payments instead of paper checks in an procedure known as remote deposit capture.
The technology allows a check-cashing business in a foreign country to scan a bundle of checks and deposit them at a U.S. bank. The entire process can take just seconds and avoids the hassle of transporting physical checks overseas.
Detailed news link at Reuters: here