Checks are still a commonly used payment form for many reasons, offering convenience and security when used properly. However, fraudsters can exploit vulnerabilities if the proper precautions are not taken, resulting in potential losses for banks, businesses, and consumers.
Types of Check Fraud
Check fraud refers to any type of scheme that attempts to financially exploit individuals or businesses through the use of paper or digital checks. There are many types of such schemes fraudsters can employ, with some of the main types of check fraud including:
- Forgery: Authorizing a check with someone’s signature without their knowledge
- Counterfeit checks: Fake checks that are made to imitate legitimate versions issued by companies or financial institutions
- Alteration: Changing details on a legitimate check without the payer’s knowledge, such as the amount or payee name
- Floating: Writing a check from an account with insufficient funds, taking advantage of the “float time” before the check is cleared
- Mobile deposit fraud: The payee makes a mobile deposit of a check they’ve received and then takes the same check to a check-cashing location to receive a second payment
The State of Check Fraud in 2024
Unfortunately, check fraud is more common than ever. From 2014 to 2022, the U.S Financial Crimes Enforcement Network (FinCEN) tracked the number of Suspicious Activity Reports (SARs) filed by depository institutions to report potential check fraud. During this time, they saw a 158% increase in reporting.
Again, check fraud can impact both individuals and businesses. In fact, according to the 2024 AFP Payments Fraud and Control Survey Report, 80% of organizations were victims of payment fraud attacks or attempts in the last year. Diving deeper into these values, the researchers report that 65% of respondents faced check fraud attacks, and overall, 30% were unable to recover the lost funds.
How to Detect and Prevent Check Fraud
Though fraudsters’ tactics are becoming more sophisticated and instances of fraud are on the rise, depository institutions, businesses, and consumers can take appropriate action to safeguard themselves against these attacks.
Checks are still a widely used payment method, and they can be safely used with the proper precautions. As a consumer, here are some things you can do to avoid being a victim of check fraud:
Verify the Issuing Bank
When you receive a check, the first thing you should do is verify that the bank listed as the issuing institution is legitimate. Otherwise, this could be a sign that the payer made a counterfeit check using a fake bank name. This BankFind tool allows you to quickly search for FDIC-insured institutions in the United States.
Verify the Check Amount
Before depositing or cashing a check, ensure it’s written for the amount you’re expecting. For example, if you sell something using an online marketplace, the “buyer” may purposefully send you a check amount over the asking price and will ask you to refund the balance, though this is typically a scam.
Verify the Security Features
Most checks contain security features such as a watermark and security threads. Though fraudsters may attempt to replicate these features, they often cannot do so accurately. Upon receiving a check, verify that it contains these common features.
Using safety checks for your own check-writing needs is also a good idea. The ones offered by CheckWorks contain chemically sensitive paper that prevents them from being altered. Plus, they contain a microprint signature line and a very light printing on the back of the document in reversed text that cannot be accurately replicated with a color copier or laser printer.
Despite the risks of check fraud, being aware of fraudsters’ tactics and using the above safety tips can make you better equipped to detect and prevent these attempts.
