How to Identify, Avoid, and Report Check Fraud in 2020 [Infographic]
Updated August 20, 2020
Since credit and debit card skimming caught fire in 2008, banks have made card fraud a top priority. The first sweeping change came in 2015. After identity theft complaints peaked at 490,220, many carriers switched to the more secure EMV cards. Those tiny silver EMV chips on your newer debit and credit cards reflect this initiative.
While EMV chips helped reduce card-present fraud, card-not-present fraud and check fraud both increased to fill the void.
Essentially, fraudsters are turning back to check fraud for its simplicity. When others zig, zag. At least that’s the scammer mindset. In 2018, check fraud accounted for 47 percent (up 12 percent in just two years) of industry losses, $1.3 billion, according to the American Bankers Association’s 2019 Deposit Account Fraud Survey. The jump was so drastic that it actually dethroned debit card fraud (44% at $1.2 billion) to claim the number one spot for fraud against bank deposit accounts.
“They [check fraud criminals] hit everywhere—businesses big and small,” said Texas Citizens Bank Customer Accounts Representative, Cindy Lilly, on common check fraud strategies. “Businesses still use checks, so we’re seeing check fraud more there. It’s often someone with payroll access stealing from their own company—usually the person you’d least expect.”
Types of Check Fraud
So how do scammers still get away with check fraud in 2020? To answer that question, you need to understand all forms of check fraud. Banks like to divide check fraud into three main categories: altered, counterfeit, and forged.
Altered Checks
What is an Altered Check?
Any valid check that’s later altered by someone other than the payor is considered an “altered check.”
Example 1: I receive a birthday check from my grandma for $100. I decide I deserve $1,000 because she made a big fuss at my wedding last year. Out of spite, I add an extra zero to the check amount and alter the written amount to match. I then present the altered check for $1,000 to my bank.
Example 2: On the way home from my morning jog, I notice my elderly neighbor raised her mail flag. Curious, I peek inside and notice she has several letters out to service companies. Knowing there’s a high likelihood she’s mailing out checks, I take the letters home with me. Once home, I use a chemical to “wash” the check—erasing the company name and writing my own in the “Pay to the Order Of” line.
Counterfeit Checks
What is a Counterfeit Check?
Counterfeit checks include false checks drawn on real accounts and checks obtained from opening a false account based on fraudulent identification.
Example 1: As a disgruntled HR rep, I log into my company’s payroll database and download the information. I also steal the company checkbook and create false IDs for all the employees listed. I sign the back of each to endorse. I set up several fake bank accounts using the personal data from the payroll database. I take my checks to multiple banks to deposit or cash out.
Example 2: Using professional design software and my superior print production skills, I create duplicate checks mimicking one I got from my business customer. I print out several phony checks and write myself several checks for small amounts. I endorse and deposit each over time, hoping the customer won’t notice the small withdrawals.
Forged Checks
What is a Forged Check?
A check falsely endorsed, signed by anyone other than the intended payee, qualifies as “forged.”
Example 1: I occasionally clean houses for a few families in the neighborhood. While cleaning, I noticed a couple of unendorsed checks sitting out on the desk. I sign the payee’s name on the back and present it to a nearby bank using a false name and ID.
Example 2: When the secretary is out at lunch, I steal a few envelopes off the top of a stack of employee paychecks. I forge the respective employee signatures on the back to endorse. Using fake names and IDs, a friend and I pose as different employees at separate banks.
Mobile Check Fraud
While Mobile Check Deposit makes depositing checks much easier for banking customers, it also opens banks up to a new kind of check fraud: mobile check fraud. In this check fraud scheme, the bank customer double-dips on their check deposit. In addition to depositing online via the Mobile Check Deposit, the payee will also try to cash or deposit the same check in person.
Texas Citizens Bank and other financial institutions require check payees to write “For Deposit Only At [name of institution].” This prevents customers from presenting the same check for deposit at multiple banks. It lets tellers know when a check has already been uploaded for deposit online.
Combination Check Fraud
Of course, sometimes criminals combine methods when committing check fraud. For instance, fraudsters attempt to duplicate a check before uploading it online, or before forging a signature.
While banks must make funds available within a certain time frame, they can later deduct that amount from your account if the check you deposit proves fraud.
Check Fraud Scams
Just because a check looks convincing, does not mean it won’t bounce later. In addition to check bouncing penalties, cashing false checks is a serious crime. If you receive an unexpected check in the mail, suspect scam. If you see an unauthorized withdrawal on your account, report the activity to your bank as soon as possible.
Reporting Fraud to Your Bank
Many banks have a hotline number or chat you can call 24/7. If you are a Texas Citizens Bank customer, call 800.554.8969 to report debit card fraud and 713.948.9494 for online banking and Treasury Management Services (TMS) support, such as check fraud. If you’re a business customer, you can also review and report check fraud every morning via Postive Pay. Call our TMS number above to find out more about Positive Pay.
Here are a few of the most popular check fraud scams victims fall for.
Signs of Check Fraud Scam
- Unexpected check in the mail
- Check for a large amount
- Advanced check for “customer experience research”
- Advanced check for work you haven’t done
Even if none of these signs apply, always ask yourself, “does this seem too good to be true?” If it does, it’s probably a scam. Scammers prey on those down on their luck. Don’t fall for get-rich-quick “opportunities”, advanced pay, or “customer experience research” schemes—even if they send an advanced check for your work. Chances are, that check will bounce.
Care for more resources on protecting your bank account against fraud? (couldn’t hurt!). Check out our article on debit card fraud and email fraud, or learn how Positive Pay helps businesses prevent check fraud.