Distributed Ledger Check Verification for Duplicate Deposit Fraud
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Solution Overview
Problem
Image-based check deposit systems are vulnerable to fraud as unscrupulous users can image a check and present it to multiple financial institutions, leading to potential financial losses for institutions that accept the check second.
Innovation Solution
Implementing a distributed ledger-based verification system that includes optical character recognition, querying a distributed ledger network to verify the check's presentation and clearance status, and writing metadata to the ledger for tracking and fraud prevention.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If image-based check deposit is implemented, then ease of operation is improved, but reliability deteriorates due to fraud vulnerability
Solution Approach 1:
A distributed ledger network acts as an intermediary between financial institutions to verify check presentation status. The system queries the distributed ledger to determine if a check has been previously presented or cleared, preventing duplicate presentations and fraud while maintaining the ease of image-based deposit processing.
2Reliability
If distributed ledger verification is implemented, then reliability is improved, but device complexity increases
Solution Approach 1:
The distributed ledger network provides a universal verification mechanism that serves multiple financial institutions simultaneously. A single ledger infrastructure enables fraud prevention across the entire network, reducing the need for each institution to implement separate verification systems and thereby limiting the increase in device complexity.
Data Source
AI summary
Systems and methods for distributed ledger-based check verification are disclosed. In one embodiment, a method may include a bank backend computer program: (1) receiving, from a computer application executed by an electronic device, an image of a presented check as part of an electronic check deposit process; (2) performing optical character recognition on the image of the presented check; (3) generating a text file based on the optical character recognition; (4) querying a distributed ledger in a distributed ledger network to determine whether the presented check has been presented or cleared before; (5) determining that the presented check has not been presented or cleared before; (6) processing the presented check for deposit; and (7) writing the text file for the presented check to the distributed ledger.