There’s no doubt that check fraud is an ever-increasing issue facing us today. From check washing to posing as legitimate depositors, fraudsters are continuously finding new ways to gain access to the money in your account. The good news? There are also plenty of ways to stop fraud from happening. With a strong understanding of how check fraud works and ideas for how to prevent it, you’ll be well on your way to keeping your finances safe.
What is Check Fraud
Check fraud occurs whenever money is withdrawn from your account via checks without your knowledge or authorization. While check use may be on the decline, check fraud is on the rise. In fact, banks across the country continue to receive hundreds of thousands of check fraud reports each year. Part of the reason we are seeing a resurgence in check fraud is due to the Covid-19 pandemic. As government relief checks were issued through the mail, it provided the perfect opportunity for thieves to take the checks for themselves. As a result, mail became a common target for fraudsters – and it still is.
How is Check Fraud Committed
Check fraud is not just committed by lone criminals, it can also be a complex operation carried out by criminal organizations. Members of these organizations will often act together to invade post office distribution centers and set up fake businesses or fake identities to route stolen checks toward. These operations might even include money mules or “walkers” who pose as legitimate depositors to cash fraudulent checks in-person.
Out of all the ways that check fraud is committed, check-washing is the most common. “Washing” involves a chemical process that is used to remove the check’s payee information and replace it with the criminal’s information, a fake identity, or a fake business account. Washing can also drastically change the check’s dollar amount. With just a few zeroes, the check’s original amount can be increased by thousands of dollars!
Plus, criminals can use a single check for multiple fraudulent purposes. Criminals might use the information found on the check itself along with information gained from mailed bank statements to commit identity theft. With your sensitive personal and account information in hand, criminals can create new accounts, new lines of credit, and even new checks using your old account’s data.
How to Prevent Check Fraud
- Consider Alternative Payment Methods
One of the most effective ways to prevent check fraud is to stop using paper checks. Instead, consider using alternative payment methods such as ACH or wire transfers. An ACH, or automated clearing house, payment involves the transfer of funds from one bank to another through the ACH network. Meanwhile, wire transfers are another alternative payment method that allows for the exchange of money between people or banks electronically. Both ACH and wire transfers can be safe, smart alternatives that prevent the use of any paper or mailed items that might be stolen and washed by fraudsters. - Opt into Positive Pay
If you bank with FFB or another financial institution who offers Positive Pay, consider opting into it. Positive Pay is a service that lets you pre-authorize checks and ACH payments, making it easier to verify dollar amounts, check numbers, and account numbers to spot red flags. If you are a business owner, you can upload a list of payments from the previous business day to Positive Pay. If an item comes through that is not on the list, Positive Pay will alert you and give you the option to either approve or deny it. As a result, it is much easier to find cases of check fraud and stop them before the checks go through. - Switch to Electronic Statements
The best way to keep papers out of the mailbox is to switch to e-statements. E-statements can allow you to view your information and have financial records on hand while eliminating the risk of any papers falling into thieves’ hands. Not only are e-statements readily available, but they can also be secured by your username and password, making it even harder for prying eyes to steal your information. - Check your account information regularly
As is the case with any type of fraud, checking your account activity regularly is an important way to stay ahead of criminals. Whether you’re checking daily, weekly, or bi-weekly, be sure to keep yourself informed about what’s going on with your account. This way it’ll be much easier for you to spot unauthorized payments, changes to your account information, and any other signs that someone else might be committing fraud using your finances. - Avoid sending checks in the mail
To avoid mail-theft related check fraud, it’s best not to send your checks in the mail. Again, seek out alternative payments or, if you do have to mail a check, take precautions to ensure that the check is not sitting around for someone to steal. For instance, drop the check off directly at a post office and, better yet, hand it directly to a postal worker rather than leaving it in a home mailbox. Similarly, you can time your drop off so that the check is sent out during the day’s last scheduled pick-up. By doing so, you can avoid having your check sit in a mailbox overnight.
Summary
Check fraud may be increasing, but so are the ways that we can stop it. By taking precautions like the ones listed above, you’ll be able to spot and prevent check fraud like a pro. If you do end up falling victim to check fraud, don’t wait! Report any red flags to your bank immediately so that any changes or unauthorized withdrawals can be stopped almost as soon as they happen. After all, keeping your information and your finances safe and sound is a top priority not just for you, but also for your bank.
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