What is Check Fraud?
Check fraud is one of the largest challenges facing businesses and financial institutions today. With the advancement of computer technology, it is increasingly easy for criminals, either independently or in organized gangs, to manipulate checks in such a way as to deceive innocent victims into expecting value in exchange for their money.
Some Types of Check Fraud:
- Forgery: For a business, forgery typically takes place when an employee issues a check without proper authorization. Criminals will also steal a check, endorse it and present it for payment at a retail location or at the bank teller window, probably using bogus personal identification.
- Counterfeiting and Alteration: Counterfeiting can either mean wholly fabricating a check –using readily available desktop publishing equipment consisting of a personal computer, scanner, sophisticated software, and high-grade laser printer — or simply duplicating a check with advanced color photocopiers. Alteration primarily refers to using chemicals and solvents such as acetone, brake fluid, and bleach to remove or modify handwriting and information on the check. When performed on specific locations on the check such as the payee’s name or amount, it is called-spot alteration; When an attempt to erase information from the entire check is made, it is called-check washing.
- Payee Fraud: Changing the name of the payee on a check to someone other than the intended recipient.
- Lottery or Sweepstakes Scams: Criminals send fake checks to victims as part of a fake lottery or sweepstakes and ask the victim to deposit the check and send a portion of the funds back to cover taxes or fees.
Is it risky to deposit a check that may be fraudulent?
You are responsible for the checks you deposit. If a fraudulent check is deposited into your account and you spend the money, you’ll be responsible for the dollar amount when the check is returned. If you are unsure whether a check is fraudulent, DO NOT deposit it into your account. While a financial institution may initially accept the check, there is no guarantee that the funds are good. It can take days, or even weeks, for a check to come back as fraudulent. Do not use those funds unless you are confident the check is legitimate.
Here are some ways to determine if a check you have received is valid.
- Did the check come with a letter? If so, read the letter carefully. Many fraud scams start with a letter and a check. The letter will have instructions to send money or purchase a money order. Do an internet search to find out if other people have received letters for the same purpose.
- Research the business that issued the check. You’ll find the name of the business in the top left-hand corner of the check. If you find a listing online, call the business and ask them if they issued the check. Do not call the phone number provided on the check or in the email as it could lead back to the fraudster.
- If you have trouble finding any information, take the check to the financial institution that issued the check and they will be able to verify whether it’s legitimate.
- If you have concerns that the check may be fraudulent, take it and the accompanying letter to the nearest branch of your financial institution to discuss with a manager or call them.
Check Fraud Tips for the Consumer
- Use online banking to pay bills whenever possible.
- Sign up for direct deposit of paychecks and other benefits.
- Use certified mail or delivery service with tracking for important checks.
- Monitor bank accounts and credit reports regularly for signs of fraud.
- Place a “stop payment” order on a check if it’s lost or stolen.
- Make sure your checks are endorsed by your financial institution and incorporate security features like watermarks, heat-sensitive ink, or special designs that help combat counterfeiting and alteration.
- Never give your account number to people you do not know, especially over the telephone. Be particularly aware of unsolicited phone sales. Fraud artists can use your account without your authorization and you may end up being responsible.
- Limit the amount of personal information on your check. For example, do not include your Social Security, driver’s license, or telephone numbers on your check. A criminal can use this information to literally steal your identity by applying for a credit card or loan in your name or even opening a new checking account.
- Never endorse a check until you are ready to cash or deposit it. The information can be altered if it is lost or stolen.