Check Fraud

The Writing’s on the Wall for Check Fraud: How to Safeguard Yourself

While the use of checks decreases each year, check fraud is on a rapid rise. According to NASDAQ’s annual Global Financial Crime Report, check fraud was responsible for over $21 billion in losses in the Americas (which includes Canada, Mexico, and all of South America), and $26.6 billion worldwide in 2023, with losses looking to increase in 2024. In light of current technology, checks may seem outdated, especially to younger generations, but there is no denying they’re a prime target for criminals across the country.

A Checklist of Methods

Check fraud is an umbrella term to refer to any criminal act involving the unlawful use of checks to steal or borrow funds and criminals have a long list of methods they use to commit check fraud.

• Mail Theft – Check fraud by mail theft is the fastest-growing type of check fraud. Its rise is so meteoric that the Financial Crimes Enforcement Network sent out a nationwide alert to warn financial institutions about it. In this type of check fraud, criminals steal physical mail with the intent of finding checks. They then either alter the check or wash it with chemicals to put new information on the check which allows them to cash it and steal money at the cost of whoever initially wrote the check.
• Check Kiting – Check kiting is when someone writes two checks from two different accounts, both worth more than the value in each account. They deposit the check from one account into the other, falsely raising the value in that account. They then use the second check to cash out the inflated funds in the account, giving them more money than they actually have. This is a very common type of check fraud and is sometimes used by those who are at risk of bankruptcy or are gamblers. In these scenarios, they have do have the intent of paying back the falsely acquired funds.
• Check Forgery – Unlike check altering and washing, check forgery starts with a completely blank check. After a criminal steals a blank check, they fill in all the information with whatever they want, forge a signature, and deposit the forged check.
• Bad Checks (or paperhanging) – Sometimes, criminals will purposely write bad checks to buy something with the intention to take whatever they buy and disappear before the vendor cashes the check and discovers it’s a bad check. Since there are more check alternatives to paying for goods, this type of scam has become less common but has not disappeared.
• Other types of check fraud – Fake paycheck scams, fraudulent lottery checks, account takeover, money order fraud, and check floating.

The Checks and Balances of Staying Safe

While there are a lot of methods criminals can use to commit check fraud, there are just as many ways for you to keep your checks and finances safe.

• Only use checks when you absolutely must.
• If you want to send someone a check, deliver it personally and encourage them to deposit it as soon as they can. This is especially important with the rise of check fraud by mail theft.
• If you send a check by mail, use the United States Postal Offices Informed Delivery, which will allow you to track mail as it gets delivered.
• If you have blank checks, keep them in a secure location.
• Shred any used check that wasn’t deposited physically (i.e. mobile deposit).
• Utilize fraud prevention services such as Check Positive Pay.