What Is Check Fraud?

Every time you write a check to someone, you’re handing them the information they need to commit check fraud—with you as the victim. That’s because the front of your check may contain such critical information as:

• Name
• Address
• Phone number
• Bank’s name and address
• Bank account number
• Bank’s routing number
• Signature

And think about what happens when you write a check for payment at a store. The clerk may add even more personal information, your date of birth and driver’s license number, perhaps. It’s enough to lead to check fraud.

What is check fraud?

Fraud occurs when a person intentionally or deliberately acts to deprive another person (or entity) of money using deceptive or unfair means. Check fraud is simply using checks to commit fraud. Among the types of check fraud are:

• Forgery – signing a check without authorization or endorsing a check not payable to the endorser
• Theft – stealing checks to use for fraudulent purposes
• Paper hanging – writing checks on closed accounts or ordering and, then, writing checks on closed accounts
• Check kiting – intentionally gaining access to funds deposited in one account before the bank collects them from another
• Washing – using chemicals to remove information from a check
• Counterfeiting – illegally printing checks using information from the victim’s account

Plenty of opportunity for check fraud

As more consumers and businesses use others forms of non-cash payment, including credit and debit cards, we’re writing fewer checks each year. Still, the Federal Reserve says we wrote 17.3 billion checks in 2015, so there’s still plenty of opportunity for check fraud.

In fact, 71 percent of businesses surveyed in 2015 experienced actual or attempted check fraud in 2015, according to a study by the Association for Financial Professionals. Checks are the payment method most often targeted for fraud.

Check fraud may not receive the media attention that credit card fraud, tax fraud, and Social Security fraud do, but it’s a big problem for individual Americans and U.S. companies. In its 2015 Deposit Account Fraud Survey, the American Bankers Association says that check fraud accounted for 32 percent of the industry’s $1.91 billion in losses in 2014.

Technology is a big reason check fraud remains such a significant crime. Criminals can easily use a personal computer, software, and high-quality color printer to produce realistic-looking checks that can often escape detection. After all, a lot of consumers and businesses use the same tools to create legitimate checks for payment.

Plus, as more consumers use their smart phones to deposit checks with their bank, mobile-based check fraud has grown.

Another way individuals can be victimized is when they receive payment in the form of fake or fraudulent checks. In such a scenario, the criminal provides a check as payment from a nonexistent bank, fake bank account, or from an account that is not theirs at all,

Protecting yourself from check fraud

The best protection against check fraud is vigilance.

The fact is, the most important factor in check fraud is a check, and it’s up to consumers to do everything in their power to keep their checks—and the information on those checks—safe from prying eyes.

Take these steps to get that job done successfully:

• Protect your checks – Because checks are relatively easy to reproduce, strive to protect your account number, routing number, and any other information a thief would need to print a fake check.
• Monitor your bank account – Regularly reconcile your bank statements to look for fraudulent transactions. Set up text alerts for checks drawn on your account over a certain dollar amount.
• Watch for “check washing” – Fraudsters use chemicals and solvents to erase or alter check information. Write your check using “fraud prevention pens,” which contain ink that is more difficult to change.
• Vet anyone who enters your home – If you allow a housekeeper, contractor, or other service persons inside your home, run them through a background check to determine how trustworthy they may be. And keep important documents, including checks and bank statements, locked up.
• No checks in cars – Never leave your checkbook out in public, and especially not stored in a car. It’s just too easy for fraud artists to break into the vehicle and steal your checks.
• Avoid mailing checks at a mailbox – Thieves can steal checks from a mailbox. Always mail checks at the post office, if possible, or try to mail shortly before postal pickup.
• No Social Security number – Never write your Social Security number on a check. It’s just too easy for check fraud artists to steal the check, get your Social Security number, and then commit identity theft.

Check fraud is an unfortunate and all-too-common occurrence. That’s why it’s critical to take the issue seriously. Anything less and you’re all too vulnerable to check fraud—and all the negative fallout that may go with it.