Check Fraud: Protect Yourself and Your Business
Although fewer paper checks are being issued now than in the past, old-fashioned paper checks remain the “go-to” payment method for many individuals and organizations. While checks may be convenient and familiar, fraud is a persistent problem. According to the Federal Reserve Bank of Boston, the total losses from check fraud were estimated at $24 billion in 2023, nearly double the amount from five years earlier.
These schemes are on the rise, partly because check theft is an easy, low-tech crime to pull off. Plus, there’s still a sizeable pool of potential victims. Dishonest individuals and organized crime networks often steal checks from residential mailboxes and public mail drop boxes.
Recent Statistics
A recent government report from the Financial Crimes Enforcement Network (FinCEN) highlighted common ways checks stolen from U.S. mail were used to commit fraud:
- 20% were fraudulently signed and deposited,
- 44% were altered and then deposited, and
- 26% were utilized as templates to create counterfeit checks.
The FinCEN report revealed over $688 million in suspicious activity linked to checks in just six months. In addition to direct financial losses, check fraud can adversely impact credit scores and business goodwill, as well as result in bank fees and payment delays.
Nip Check Fraud in the Bud
After a check has been stolen, the thief may continue to conduct fraudulent transactions until theft has been detected. So, it pays to prevent fraud from happening in the first place. Consider the following seven preventive measures:
1. Stop writing checks. Replace checks with alternative payment methods, including debit and credit cards, wire and Automated Clearing House (ACH) transfers, and third-party electronic payment services, such as PayPal, Venmo and Zelle. These options have security measures in place to prevent criminal activity.
2. Use your bank’s fraud prevention tools. Banks provide customers with many solutions to combat payment fraud. Visit your local branch or contact your relationship manager for customized fraud-prevention advice.
3. Respond quickly to alerts or calls from your bank. Many banks offer fraud alert services that notify you of suspicious account activity, such as transactions over a certain dollar threshold. Make sure to update your contact information with the bank. Businesses should also train employees who are designated as points of contact to understand the importance of responding quickly.
4. Reconcile accounts regularly. It’s essential to verify the legitimacy of transactions posted to your account as often as possible. Most banks offer online banking tools and apps that allow you to view check images as soon as they post to your account. Use these tools to verify the payee, amount and account paid. Notify your bank promptly when you suspect fraudulent activity. Acting quickly maximizes the assistance your bank can provide and lowers your out-of-pocket costs.
5. Use security ink. Check fraud often involves altering legitimate checks. Criminals can easily erase regular ink using common household products, such as bleach and nail polish remover. Security ink is hard to erase, making it more difficult for criminals to compromise your checks.
6. Secure your checks. While check fraud often involves third parties, it can also be committed by family, friends and employees. Store blank checks in a locked cabinet. Businesses should also limit employees’ ability to reorder checks.
7. Shred old checks and statements. Destroying old financial records can prevent sensitive information from being used to engage in check fraud or any other payment fraud
Awareness Is Key
While opportunity is fueling check fraud schemes, knowledge and vigilance can help individuals and businesses reduce their risks. Alternative payment methods are the first line of defense against check theft, but that’s not a realistic solution for every situation. So, implementing additional security measures is crucial for those who still write and accept paper checks.
Copyright 2024
This article appeared in Walz Group’s October 14, 2024 issue of The Bottom Line e-newsletter, produced by TopLine Content Marketing. This content is for informational purposes only.
