It might sound a little outdated - but make no mistake, check fraud is one of the biggest fraud issues with payments in the world right now.
Checks are still one of the most popular form of payments, with 81% of B2B companies still primarily using checks to complete transactions despite issues with check fraud. Why?
This is mostly because checks are still a trusted method of payment that almost all companies accept. For most large companies check issuance and acceptance, along with AP and AR processes are built around check sending and processing.
In 2021, the FTC reported 11.2 billion checks were written. Is this lower than previous years? Yes. But the volume is still large, and as long as checks are still legal tender, they will continue to be used.
With new methods of payments like EFT's and other FinTech applications gaining popularity, you would think check payments would be on the bottom of the totem poll for what kind of payments fraudsters attract. But the long and short of it is - checks don't require the tech savvy-ness needed to fraud electronic payments. But what is check fraud?
With how much check fraud has been rising over the past few years, it's important to know all the techniques criminals use to fraud checks. Whether its a company's internal employees looking to steal from their own company, petty fraudsters who steal checks from mailboxes, or photo-shopping wizards who create their own checks with digital applications, its important to know what check fraud is and how it can be done.
Check fraud is a category of financial crime involving the manipulation or falsification of checks for personal or financial gain. When most people think check fraud, they think of the 2004 movie "Catch Me If You Can" starring Leonardo DiCaprio as Frank Abagnale, Jr, the most infamous check fraudster turned FBI fraud advisor. In his criminal past, Abagnale altered PANAM checks by scraping and altering bank account and payee information. Since then, check fraud has gotten to be more sophisticated. Here are some of the techniques, both recent and old-school.
Forgery involves fraudulently signing another person's name on a check without authorization. This could range from a stolen blank check being signed to someone illicitly endorsing a check made payable to someone else. Forgeries thrive on speed, with fraudsters often attempting to cash or deposit the fake checks before detection is possible.
Counterfeit checks are precision-made duplicates of legitimate checks. Advances in high-quality printers and scanners make it possible for criminals to create nearly identical replicas of authentic documents. These bogus checks often use stolen bank information or are designed to appear as payroll or business checks, deceiving both individuals and financial institutions.
Check kiting is a type of fraud that exploits the processing time between two or more bank accounts. Fraudsters intentionally write checks from an account with insufficient funds, depositing them into another account and withdrawing cash before the initial bank recognizes the deficit.
Check cooking is a newer technique in which criminals steal checks, photograph them, and alter them digitally using design applications like Photoshop. This technique is a lot like check washing, except the criminals don't have to alter the check physically.
Check washing is quickly becoming one of the most pressing issues in check fraud today. It combines elements of alteration and forgery—but with a unique twist.
Check washing involves removing or "washing" ink or toner on a legitimate check to alter key details. Using household chemicals or other substances, criminals eliminate fields—such as the payee and the amount—while keeping the original check intact. This creates opportunities to rewrite the check for a larger amount or redirect the payment entirely.
Check washing has become one of the fastest-growing trends in check fraud. Last year, the Better Business Bureau declared check washing to be an $815 Million a year issue. USPS also released many statements warning of growing concerns of mail theft that resulted in check washing schemes after criminals stole checks from their blue mailboxes.
TROY Group has developed a patented technology known as MICR Toner Secure, which stands as the industry’s most reliable measure to combat check washing. Unlike regular toner, TROY's MICR Toner Secure embeds an anti-fraud security agent into every printed check.
When someone attempts to chemically remove or alter the information printed on a TROY-secured document, the toner reacts by bleeding red. The red stains serve as unmistakable evidence of fraud, which instantly ruin & void the check, while also letting fraudsters know they've been stopped.
To learn more about MICR, click here.
Check fraud, including check washing, poses a serious risk to both individuals and organizations. However, solutions like TROY MICR Toner Secure place security in your hands. By adopting proactive measures and employing secure technologies, you can prevent fraud before it happens—saving time, money, and peace of mind.
For more information on fraud prevention solutions, visit our website.