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Protect Yourself Against Check Fraud

Check writing is giving way to digital payments, but many bank customers maintain a preference for paper checks. With physical check writing comes a heightened risk of fraud. The winter holidays are an especially vulnerable time, not only for package theft, but for check theft and fraud. Bad actors intercept checks from the U.S. mail system and alter the documents to redirect funds.

According to the Financial Crimes Enforcement Network (FinCEN), the U.S. Treasury’s investigative arm, reports of check fraud have more than doubled since 2020. The rise is due in part to greater reporting of such theft than in earlier years when reporting was less thorough.

In 2023, FinCEN issued an alert revealing that there were 680,000 cases of possible check fraud reported the previous year. That’s a jump from 350,000 in 2021, which was a 23% increase over 2020.

FinCEN said it sees no indication that check fraud is going to decline anytime soon, so it is calling on financial institutions and the United States Postal Inspection Service to be vigilant. FinCEN warns that the main source of stolen checks is the U.S. mail. That includes the large blue boxes on street corners and outside U.S. Postal Service (USPS) branches, as well as from residential mailboxes.

Fraudsters know that physical check writing can more often be used for big-ticket expenses. Data from the Federal Reserve Bank of Atlanta shows that consumers are more likely to use checks for higher-dollar-value payments for utilities, rent, charitable donations, government taxes and fees and building contractors. And compared to other types of income, rental and self-employment income are more likely to be paid by physical check.

Check Washing

“Check washing” is an increasingly popular way of altering paper checks to commit fraud.

  • Check washing starts when a scammer steals a physical check, usually from the mail, then uses chemicals to “wash” off the ink, fills in their own name and cashes it.
  • Sometimes, the fraudster uses an associate with a legitimate account to defray suspicion before eventually receiving the money themselves.

Fraud tends to increase during the holiday season – which brings more volume of mail and mailed checks. Fraudsters are perpetrating fraud not only against individuals, but small businesses, which may be writing and handling a lot of checks.

One of the best lines of defense is educating consumers that the type of ink that is most preferable for a check is black ink that’s indelible, or semi-permanent, so that it’s longer lasting.

And please remember not to put checks in the outgoing mail with the red flag up on your mailbox. And use caution against dropping your mail with checks in the [USPS] blue box – walk it into the post office.

On the small business side, positive pay services are becoming important. They can capture the amount, who has been paid, the date, the check number, and data that can be matched against that check. It protects both the bank and the organization using checks.

Being able to track images of cleared checks can help intercept fraud more quickly, which is where online banking is so helpful.

It will take a partnership and vigilance with banks and their clients to stop check fraud – in how they issue payments, how they send money, and how frequently they monitor their accounts.

For more information, come into one of our offices to talk to us about steps you can take to help us help you in your fight against fraud.