Tech Tip: Weeding Out Check Fraud: Protecting your Financial Crops

Matthew Cosgrove GreenStone VP of Information Security

However, with the advancement of technology, the risk of fraudulent checks has increased significantly. According to the Financial Crimes Enforcement Network (FinCEN) there was over 680,000 reported Suspicious Activity Reports (SARs), that was an increase of 50% compared to 2021. Mail theft-related check fraud continues to be one of the most significant money laundering threats to the United States (FinCEN, 2023). Unfortunately, numerous GreenStone customers have reported stolen checks from their mailboxes in the last year. In this article, we will discuss the different types of check fraud, how to prevent it, and what to do if you are a victim.

A fraudulent check is a check that is not genuine and is usually created to deceive an individual or business. The check may be created by copying an original check or may be entirely counterfeit. The fraudulent check may be used to obtain goods, services, or money from an unsuspecting victim. Fraudulent checks can cause significant financial losses for individuals, businesses, and even financial institutions. It is essential to be aware of fraudulent checks to protect oneself from falling prey to these scams.

Fraudulent checks come in different forms, and scammers are continually coming up with new tactics to deceive people. Some of the common types of fraudulent checks include:

1. Forgery: Forgery occurs when someone signs a check that does not belong to them. This can be done by stealing a checkbook, creating counterfeit checks, or altering an existing check. In some cases, the stolen check is used as a template to create multiple fraudulent checks.

2. Counterfeit checks: Counterfeit checks are fraudulent checks created to look like legitimate ones. They can be made by scanning, copying, or printing checks. Counterfeit checks are usually created using high-quality printing materials to make them look authentic.

3. Check kiting: Check kiting is a form of check fraud where someone writes a check from one account and then deposits it into another account. The check writer takes advantage of the time it takes for the funds to clear, writing checks on the deposited funds before they have cleared.

4. Check washing: Check washing involves removing the ink from a legitimate check using chemicals, and then rewriting it with new details, such as a new payee or a larger amount.

5. Paperhanging: Paperhanging occurs when a person writes a check for a purchase, knowing that they do not have sufficient funds in their account to cover it. The individual may repeat this process with multiple merchants, leaving them with worthless checks.

Check fraud is a crime that can be prevented with some simple measures. Here are some tips to help prevent check fraud:

1. Keep Your checks safe: Keep your checks in a safe place, preferably locked away. This will help prevent them from being stolen or misplaced. It is also a good idea to only carry the checks you need when you go out.

2. Monitor your bank accounts: Regularly monitor your accounts to ensure that all transactions are authorized. If you notice any unauthorized transactions or discrepancies, report them to your bank immediately.

3. Use secure mail: When sending checks through the postal service, use a secure mailbox or PO box. Do not leave outgoing checks in your home mailbox for pickup by the postal worker.

4. Be cautious when giving out checks: Only write checks to people or companies you trust. Avoid writing checks to people you do not know or for vague / unclear purposes.

5. Use security features: Use checks that have security features, such as watermarks, microprinting, or heat-sensitive ink. These features make it more difficult to forge or alter checks.

6. Use online banking: Use online banking to monitor your account activity and set up alerts for any unusual transactions or suspicious activity. Consider using online banking capabilities to make payments electronically. If you do, make sure you take the appropriate due diligence and protect your accounts by enabling multifactor authentication on your accounts. If you suspect that you have become a victim of check fraud, it is important to take immediate action to minimize any potential losses. Here are the steps you should take:

1. Contact your bank or financial institution: Report the fraudulent activity to your bank or financial institution immediately. They will be able to help you stop any unauthorized transactions and freeze your account to prevent further losses.

2. File a police report: Contact your local police department and file a report of the fraudulent activity. Be sure to provide as much information as possible, including any evidence you may have.

3. Keep all documentation: Keep copies of all documentation related to the fraudulent activity, including bank statements, canceled checks, and police reports.

4. Contact the payee: If the fraudulent check was written to a specific payee, contact them immediately to inform them of the situation.

5. Check your credit report: Check your credit report for any unauthorized accounts or activity. Contact the credit bureaus to report any discrepancies. Keep credit bureau’s frozen to prevent additional accounts from being opened.

6. Consider identity theft protection: If your personal information was compromised as part of the check fraud, consider signing up for an identity theft protection service.

Check fraud is like a weed that can quickly spread and take over a farm if not dealt with promptly. Much like a farmer who must constantly monitor and protect their crops from weeds, individuals and businesses must also be attentive in protecting themselves from check fraud. By applying preventative measures such as securing checks, monitoring accounts, and using security features, one can effectively create a strong defense against check fraud. However, if check fraud does occur, it is important to take immediate action and report it to the proper authorities, just as a farmer would quickly remove weeds to prevent further damage to their crops.

By treating check fraud as a persistent and ever-present threat, individuals and businesses can ensure their financial wellbeing remains healthy and robust, much like a well-tended farm.

References

FinCEN. (2023, February 27). FinCEN Alert on Nationwide Surge in Mail Theft-Related Check Fraud Schemes Targeting the U.S. Mail. www.fincen.gov. ■