Check fraud can take many forms, including altering check amounts, stealing and altering valid checks, and using check kits. Check protection services can help prevent these types of fraud.
Check fraud is an illegal crime that can take place in a number of ways. Some of the schemes that qualify as check fraud are very simple, while others are much more complex. Here are some examples of the different types of check fraud and how they work.
One of the most common types of check fraud employs a technique known as check washing to alter the face amount of the check. As an example, an account holder writes a check in the amount of one thousand United States dollars (USD). The recipient of the check uses techniques to alter the check so that the amount payable becomes ten thousand dollars. Because the check is an identifiable original instrument of the account holder, and the authorization signature is obviously valid, banks would have no reason to suspect a problem with the check. Assuming the account has enough funds to clear the altered check, the recipient can take the money and run. The unfortunate account holder does not become aware of the fraud until after the fact.
Another common example of check fraud involves theft of mail. In this scenario, thieves intercept valid checks issued by a business to a vendor. The face value of the check is left intact, but the recipient information is changed to allow the thief to deposit the check into an account created in order to receive the money. This type of approach can take longer to come to light, since the company can’t verify anything other than checking the numbers and amounts before beginning a monthly account reconciliation. By then, the thief withdrew the funds and closed the receiving account.
A variation of this type of check fraud is stealing valid checks and using them to create counterfeit checks that can be written for any amount. Counterfeit checks account for a large amount of check fraud today. This type of transaction requires a quick turnaround, as a company may notice a check that clears the corporate account with a check number that is out of sequence or has a face value that does not post.
One last example of check fraud is the old fashioned check kit. In this scenario, there is no thief to steal checks or tamper with them. Instead, an individual will establish two separate checking accounts. A check is written to one account and deposited into the second account, to cover other checks that were written on the second account. The next day, a check is written on the second account and deposited into the first account. This is to cover the initial kited check that was previously deposited into the second account the day before.
The reason is that the process can be continued until a paycheck or other source of funds is received and check combining becomes unnecessary. Many honest people are unaware that this activity is, in fact, fraud, simply because its intent is to make all checks good eventually. Unfortunately, that doesn’t always happen. Evidence of check writing can lead to legal implications and fees that will do nothing to improve a person’s financial condition, so this process should be avoided at all costs.
An important means of avoiding all types of check fraud is to make good use of check protection services. Your local bank will be able to help you evaluate your current practices and suggest different tools that will help protect you from almost all types of check fraud. In many cases, these services are available free of charge, while others may require a small fee.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
