Check floating and counterfeiting are among the many types of check fraud you have to worry about. In fact, 75 percent of companies were targets of check fraud in 2016, an increase from 71 percent in 2015, according to a March 2017 survey by the Association for Financial Professionals.
Check fraud happens when a thief steals an account number to write fake checks in the account holder’s name. Check fraud is a major problem that can happen to anyone — and common scams don’t end with personal checks: cashier’s check scams are also prevalent. In order to safely navigate these scams, you need to understand how check fraud happens, how to prevent it, and how to combat — by spotting fake personal checks, fake certified checks and fake cashier’s checks and by verifying legitimate cashier’s checks.
Types of Check Fraud
Checkbooks are becoming extinct, which might be a good thing due to the many incidents of check fraud every year. Several types of check fraud are still being committed, and if you still carry a checkbook or receive checks — personally or for business — you need to know about them.
One check can contain your whole financial story — it holds a snapshot of your personal information, including your bank account number. Armed with this information, a scammer can take over your account or purchase items with your money.
Frank Abagnale, the infamous check forger who inspired the film “Catch Me If You Can,” explained the danger of checks in a May 2008 interview with U.S. News & World Report. “On that check is my name, address, phone number, my bank’s name and address, my bank account number, routing number, and my signature,” Abagnale said. A store clerk would typically also write on the check the account holder’s driver license number, date of birth and sometimes, his Social Security number.”
“People don’t know what happens to the check after a store clerk has it,” said Abagnale. “What I do know is that anyone who sees the front of that check has more than enough information to draft on my bank account,” said Abagnale.
So that you can better protect yourself from being a victim, it’s important know the different forms of check fraud. Here are several ways criminals can commit crimes with checks:
|Type of Check Scam or Check Fraud Risk||How the Fraud Is Committed|
|Online Spending, Selling and Renting||Many websites allow you to purchase items if you provide your bank’s name and routing number along with your account number and billing address. Not all sites guarantee that they verify the true identity of customers’ accounts, so someone with your checking information could make fraudulent purchases.|
|Account Takeover||Account takeover happens when a thief gets your financial information and changes your mailing address to one he can access. This way, he can empty your bank account before you even realize a cent is missing.|
|Paperhanging||Paperhanging occurs when someone writes checks on a checking account he knows is closed. Paperhanging can also refer to the reordering of checks on closed accounts.|
|Check Washing||Many types of inks are easy to remove from checks, which enables a thief to delete the name of the payee and write in a new name and a different amount. If you can’t prove you didn’t write the stolen check, you might be held liable for it.|
|Check Kiting||Check kiting happens when a thief opens accounts at two or more banks to create fraudulent balances and take advantage of the time it takes for checks to clear. Check kiting results in the false inflation of an account balance, which allows checks that wouldn’t otherwise clear to do so. For example, a criminal might deposit a check for $100 in one account, then write a check from that account for $300 and deposit it into a second checking account. Before the bank can process the first deposit, the criminal immediately withdraws $300 in cash from the second checking account.|
|Counterfeiting and Check Alteration||Counterfeiting a check can be done in two ways: A thief fabricates a check with special publishing equipment or duplicates a check using a state-of-the-art photocopier. Check alteration happens when a thief uses chemicals to break down the writing on a check and alters the information on it, similar to check washing.|
|Forgery||Businesses are the most common victims of forgery. For example, an employee will take a check from his employer, write himself a sum of money, and cash it using his own ID or a fake ID and credentials.|
|Fake Paychecks||If someone recruits you or you see a job posting online for a work-from-home or telecommute role, make sure it is legitimate. Some scams present this type of job with an offer of a first paycheck or bonus check in advance before you’ve done any work. In this scam, the fraudster will either try to obtain your bank account information or will send you a fake check asking you to cash it or deposit and withdraw it, keeping a portion for yourself and wiring a portion back to them.|
Intentionally Overdrafting Will Cost You
You can use a check to pay for something even if your account doesn’t actually have the funds necessary to cover it. But writing a check when you know you don’t have the money to cover it — and hoping you’ll be able to make a deposit in time so the check can clear — is a dangerous practice.
Writing checks for funds you don’t have is financially irresponsible. In addition, it’s a type of fraud that can lead to bounced checks, bank overdraft fees and other charges that can put your checking account and savings at risk.
Keep Reading: How to Avoid Bank Overdraft Fees
How to Tell If a Check Is Fake
You can distinguish a legitimate check from a fake check in several ways. Some anomalies might come up in the process of check writing, so the presence of one of these signs is by no means a sure indication of a bad check. But if more than one or two of the following signs are present, you should be wary of a possibly counterfeit check:
- The check lacks rough edges or perforations.
- Your name is printed in a different font from your address or other information on the check.
- The address of the bank or the customer is missing.
- You see a shiny, magnetic ink character recognition code at the bottom of the check. Real MICR ink is dull, so a shiny, glossy appearance often indicates a counterfeit check.
- The check has stains or discolorations, possibly from a thief using altering chemicals.
Verify the following information on any personal check or cashier’s check to make sure it is legitimate:
|Information to Verify||Description|
|Bank Contact Information||Verify the bank name, bank address and phone number, especially if it is from a foreign bank.|
|Payor and Payee Contact Information||Check that any names are printed correctly and that the signature is or at least appears genuine.|
|Bank Account Numbers||You, your bank or the issuing bank can verify that the bank’s routing number and the payee’s account number are correct.|
|Date and Amount||Make sure the date and amount of the check are correct, particularly that the amount is not for more than what is due.|
|Overall Accuracy||Any misspellings, typos or other inconsistencies can be signs of fraud.|
If you suspect you might have a fake check, you shouldn’t cash it. Report it to the Federal Trade Commission, the U.S. Postal Inspection Service, and your state protection agency, or ask your bank for help reporting the fraud. If there is reasonable doubt about the authenticity of a check you’re dealing with, it’s worth the time to look into possible fraud.
Related: How to Write a Check
How to Protect Yourself Against Check Scams
The best way to prevent check fraud and protect yourself from the dangers posed by personal checks is to stop using them, which isn’t very hard in this age of online and mobile banking. Learn how to pay bills online through your bank account, which is safer and more secure than sending a check, quicker, and cheaper because you won’t even need a stamp. Also, don’t forget that you can wire money, which is a fast and safe way to pay.
If you must write a check, you should exercise caution to prevent a fake check scam from happening to you. Check fraud frequently occurs due to carelessness protecting personal information and mail, so using a locked mailbox could help you reduce your chances of being targeted for a scam. Take a few other cautionary measures against check fraud if you still use checks:
- Write checks only to trustworthy individuals and companies.
- Mail your checks in a secure manner or deliver them in person.
- Use a gel pen to prevent check washing.
- Balance your checkbook every month without fail. Many people fail to open their bank statements every month, which is risky because you might be the victim of check fraud and not even know it.
- Cut down on the number of checks you’re writing. Writing a check to pay your credit card bill is one thing; writing a check to pay the cashier for your weekly groceries might can be riskier.