“What’s old is new again” is a common phrase suggesting that trends, fashions, or ideas from the past often return with a modern twist. But does this apply to credit union risks? Are older approaches being revived—or simply reimagined—in ways that make them valuable again to fraudsters?
Check fraud, check kiting, and loan fraud may feel like legacy risks — issues we’ve managed for years. However, these schemes are being reinvented through digital channels, artificial intelligence (AI), and social engineering. As a result, they have reemerged as significant threats impacting credit unions nationwide.
While the tactics may sound familiar, their impact and complexity are anything but. Losses are increasing in both frequency and severity across these three areas.
Check Fraud
A recent Federal Reserve Payments Study (March 2026) reports that check volume has decreased by 83% over the past 25 years. However, checks remain the payment method most susceptible to fraud. According to the 2026 AFP Payments Fraud and Control Survey Report, 58% of organizations reported check fraud in 2025, outpacing both ACH and wire fraud.
Stolen mail is a key driver behind the rise in fraudulent deposit losses. Fraudsters steal issued checks and may:
- Alter or chemically “wash” checks by erasing ink and changing the payee and amount
- Manipulate the magnetic ink character recognition (MICR) line by adding faint symbols or characters to disrupt processing
- Manufacture counterfeit checks using information from legitimate checks
- Open fraudulent accounts—often business accounts—to deposit and cash these checks
Money mules are frequently recruited to open accounts and conduct transactions as part of broader fraud schemes.
Another significant issue involves accepting checks without proper endorsement, including jointly payable checks missing required signatures. Missing endorsements may jeopardize a credit union’s ability to recover losses under its fidelity bond policy.
Check Kiting
Check kiting exploits the time delay—or “float”—between when a check is deposited and when funds are collected. This allows fraudsters to artificially inflate account balances and withdraw funds that do not actually exist.
Both consumers and businesses have engaged in kiting schemes, often due to financial hardship and cash flow challenges. By relying on uncollected funds to cover obligations, they create unsustainable cycles that eventually collapse. Business-related kiting schemes tend to result in the largest losses, often exceeding $1 million.
A critical mitigation point: do not contact other financial institutions if you suspect check kiting. Providing advance notice may allow checks to be returned unpaid to your institution, leaving your credit union responsible for the loss.
Loan Fraud
Loan fraud is a growing concern for credit unions, with a noticeable rise in fraudulent applications driven by converging factors such as advancing technology, widespread data exposure, and economic pressures.
Digital lending has reduced in-person verification, increased convenience but also introduced new vulnerabilities. Fraudsters now use AI to generate convincing fake documentation, phishing communications, and synthetic identities that can evade basic detection controls.
Commonly falsified documents include:
- AI-generated identification
- Financial statements
- Proof of employment
- Payroll records
- Credit reports
Fraudsters are also leveraging AI-powered deepfakes—including audio and video—to enhance social engineering attacks and
increase their effectiveness.
Every credit union has a unique risk profile but understanding how emerging threats evolve from familiar schemes is critical. These “old is new again” risks continue to adapt and can significantly impact operations and financial performance if left unchecked.
Ensure employees are well trained to recognize fraud and equipped to serve as a first line of defense. Strengthening awareness and detection capabilities is essential in today’s environment.
For additional insights and risk management resources, visit the TruStage® Business Protection Resource Center at http://www.trustage.com/bprc
Insurance | Financial Services
This resource is for informational purposes only. It does not constitute legal advice. Please consult your legal advisors regarding this or any other legal issues relating to your credit union. TruStageTM is the marketing name for TruStage Financial Group, Inc., its subsidiaries and affiliates. TruStage Insurance Products offered to financial institutions and their affiliates are underwritten by CUMIS Insurance Society, Inc. or CUMIS Specialty Insurance Company. Cyber policies are underwritten by Beazley Insurance Group or other nonaffiliated admitted carriers.
This summary is not a contract and no coverage is provided by this publication, nor does it replace any provisions of any insurance policy. Please read the actual policy for specific coverage, terms, conditions, and exclusions.
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