Check fraud is a type of criminal activity that has persisted even in the internet age and remains a significant threat to individuals and businesses.
Many modern consumers have long since moved on from possessing a checkbook and have gravitated towards using online check writing software to fulfill their payments. However, these paper documents are still reasonably common, especially for business use.
As technology has advanced, so too have the methods criminals use to access your data, and one standard approach is the use of checks. Once they have your information, they can take advantage of it in a wide variety of ways.
We’ll help you understand what check fraud is and how to avoid being a victim.
Table of Contents
What Is Check Fraud?
Check fraud is a broad term for a range of fraudulent activities involving checks, including:
- Forgery
- Counterfeiting
- Theft
- Kiting
- Washing
- Paper hanging
Each of these methods poses a risk of loss to the victim, but at its heart, check fraud results when an unscrupulous individual steals or misrepresents a check’s information for personal gain.
Thieves may gain access to your information from a check by intercepting it in the mail and subsequently creating a counterfeit check in your name.
They may then wash the check to remove information or send you a fraudulent check to get you to send them money.
How Do Fraudsters Collect and Use Data?
Check fraud, especially mail-related check fraud, is a significant problem in the United States. While more than 90% of check fraud is detected and prevented by the American Bankers Association (ABA), it’s still very prevalent today.
Criminals can collect data to create bogus checks quite easily. Some thieves collect mail left for the post office and rifle through it for personal information they could use to fill out these documents. Others use stolen keys for P.O. boxes to discover checks sent out for bills or gifts.
Once they have a check, criminals will remove the payee and the amount paid to create a blank check they can either use or sell in an online fraud market.
Modern Check Fraud Schemes
Check fraud often requires the user to submit personal information unwittingly for the criminal to access the victim’s data.
While individual scams may vary, here are a few to look out for:
- Lottery scams. If someone contacts you to congratulate you on winning a lottery, beware. Scammers will send you a fake check for the supposed winnings and request a check for taxes and fees.
- Unsolicited check schemes. In this scheme, a scammer sends you a check for a few dollars. By cashing it, you may be signing up for a loan or participating in a program that sucks money out of your account.
- Overpayment schemes. A criminal may purchase something from you online and overpay for the item. Then, they request a refund for the overpaid amount by check.
Is Check Fraud Still Relevant?
There’s a lot of media attention dedicated to fraudulent online activity, and for a good reason—many of the scams seen today have phishing attempts attached to them.
Whether it’s the classic car warranty scam or an email asking to reconfirm your details, many everyday scams demand our attention.
Check fraud is a type of activity that has thrived thanks to the advent of technology.
Despite a drop in the usage of checks over the years, fraudsters continue to scam their victims through check fraud, primarily due to two factors: the vulnerability of checks in general and the ease of creating fraudulent copies using inexpensive technology.
Astonishingly, over 70% of U.S. organizations have a run-in with a check fraud scammer, from run-of-the-mill money order scams to more complex schemes.
New techniques allow scammers to reproduce fake checks with high-quality stock, legitimate financial information, and even verifiable routing and account numbers.
Scammers can reach out to individuals through email or other social engineering tactics, convincing them to deposit a check for one reason or another, allowing the fraudster to wire money before the individual’s financial institution gets wind of the scam.
While most banks will replace stolen money when someone falls victim to check fraud, the more considerable risk of check fraud is often identity theft.
Since checks contain much personal information, thieves can use them to open bank accounts or apply for loans, accompanied by other fake documents that the impersonator may have access to.
Dealing with the flurry of fraudulent, unauthorized activity that follows a check fraud attempt is often the most timely and costly part of being a victim, and it’s especially challenging for businesses.
How to Avoid Check Fraud
The first active step to avoid any scam—not just check fraud—is to be on the lookout for suspicious behavior. Never give out a check to someone that you don’t trust. In addition, beware of the following situations:
- Being pressured to send money right away
- Being asked to buy gift cards
- Being asked to pay for a prize
- Being told to send money overseas
Keep an eye out for any of these situations, and generally stick to only using checks with people you know and trust. Don’t accept checks from anyone you don’t know, and don’t cash anything in if you’re not expecting a check.
You can also take some active steps to verify the check’s authenticity.
First, look closely at the check quality; scammers do their best to replicate the high-quality watermarks and security threads on actual checks, but the quality may be noticeably worse.
You can also use the FDIC’s BankFind database to check whether the bank listed exists and contact the bank itself to confirm whether the check is legitimate.
Make sure to visit the bank’s official site instead of calling the number provided on the check since it, too, may be fraudulent.
Final Thought
While certainly not as prevalent as it used to be, check fraud is still a danger to anyone using checks. As the most vulnerable form of transferring money, check fraud remains popular for scammers and criminals who make a living off other people’s suffering.
To avoid these scams, use discretion in who you send checks to, and don’t accept any checks that seem suspicious.
