Checking in on Check Fraud

As we move forward in an increasingly digital world, financial risks continue to evolve with the times. However, one of the oldest financial scams still lives on in our modern age – check fraud.

What is Check Fraud?

Check fraud (as defined by the American Bankers Association) is an umbrella term that covers a broad range of financial crimes associated with the use of stolen or counterfeit checks at financial institutions in the hands of scammers. It remains the most common type of financial fraud reported at U.S. depository institutions that impacts both commercial and consumer banking environments.

Check Washing is a common scam where a criminal steals a paper check (typically from envelopes sitting in outgoing mailboxes) and chemically “washes” the ink off to change the check’s payee or amount. They will then deposit the stolen funds into their account. On occasion, check washing can also involve targeting postal workers to steal mailbox keys to access outgoing mail and use any outbound checks for dishonest gain. If you have mailed a check but the recipient reports never receiving it, you might have potentially been a victim of check fraud.

Ways to Guard Against Check Fraud:

• Prompt Mail Retrieval. Scammers on the lookout will often see a raised mailbox flag as an easy target to rifle through outgoing mail for checks. Therefore, reducing the amount of time a check is unsupervised is best practice to ensure that your check gets safely from point A to point B. Be sure to pick up any mail soon after delivery to mitigate the risk of theft.

• Secure Mailing. If you are mailing a check, consider sending it directly from a post office instead of placing the envelope into a public or unsecured mailbox. This reduces the amount of risk by ensuring your outbound check will be handled in the most secure way with less potential for interception by scammers.

• Write Using A Gel Pen. Consider using a black gel ink pen when writing physical checks, as the ink formulation in gel pens causes writing to sink deeper into the fibers of the check, making it more difficult to alter.

• Leave No Space. Make a line or marking to fill in empty spaces in the payee or amount sections of your check. This practice reduces the amount of space a potential scammer might have to work with when filling in fraudulent information.

• Utilize Positive Pay for Your Business. Positive Pay is an automated detection tool that protects your business against altered or forged checks and electronic payments (ACHs).

• Pay Digitally When Possible. Reduce the physical number of checks you send by opting to send payments electronically through secure methods like Bill Pay or Zelle®. These methods are often more secure and convenient, preventing a written check from being stolen and “washed”. Utilizing tools like Bill Pay also means that in the event that a payee does not accept online payments, your bank can send a digitally typed and printed check on your behalf, rather than handwriting and mailing a check.

Steps to Take if You Become Affected:

1. Stop payments being issued from the affected account as soon as possible. If you haven’t recovered the funds, make sure that no further checks are issued from the impacted account until you’re positive that the account hasn’t been compromised.

2. Contact your bank to take action. Reach out to your bank as soon as possible to have the affected accounts frozen or to have future withdrawals preemptively blocked in order to prevent the loss of further funds.

3. File a Police Report.

4. Report Fake Checks. Send any fraudulent checks received by mail to the U.S. Postal Inspection Service and report counterfeit checks to the Federal trade Commission.
   
   Once you’ve been in contact with all affected parties make sure to connect with your bank’s fraud department to recover any losses. Depending on the nature of the fraud, they may be able to restore lost funds to your account.

5. Monitor. Closely monitor accounts for any further suspicious activity.