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check fraud and how to protect yourself

Check Fraud and How to Protect Yourself

While paper check use has been steadily declining for years, slowly being replaced by various digital payment methods, mail-related check fraud is rising.

On the GO (the BillGO blog) recently covered this uptick in check fraud and demonstrated how digitizing payments are helping to remedy check-related fraud. As a follow-up, we’re taking a more in-depth look at the persistent problem of check fraud and the steps consumers and businesses can take to shield themselves from check fraud. 

Check Fraud In the Spotlight 

Among the check-fraud scams that recently captured the national spotlight was thieves stealing checks right out of mailboxes (in some cases using stolen or copied mailbox keys). Thieves then use household products such as nail polish remover to erase the amount and payee information, replacing it with bogus names and amounts. These fraudulent checks are then sold to other bad guys through darknet marketplaces.

"Check fraud accounts for 60 percent of attempted bank account theft."

This particular crime ring took center stage when Evidence-Based Cybersecurity Research Group monitored 60 online communication groups late last year and found an average of 1,325 stolen checks sold each week in the U.S., valued at approximately $11.6 million. (And this was only an estimation based on the small portion of the plunder.)  

While it may seem like an old-school crime, mail-related check fraud is a booming business. According to fraud expert Jake Emry, attempted check fraud is up over 106 percent from 2021 while volume increases in checks are only up 8 percent.” 

And mailbox check theft is only one variation of the age-old problem. 

The American Bankers Association found check fraud accounts for 60 percent of all attempted bank account theft. 

Why Check Fraud Endures

It’s hard to pin down a single reason for the ongoing plague of check fraud; however, most experts point to the following factors as contributing to its seemingly unwavering consistency:    

  • Stimulus funds have dried up, forcing fraudsters back to their scam of choice. 
  • Social media sites are often used to call out the booming black market for stolen checks.
  • Fraudsters open new accounts at neobanks and exploit mobile deposit functionality.
  • Banks’ aging check fraud technology isn’t keeping up with the newer fraud schemes.

And while everyone is at risk of being a victim of fraud, check scams primarily target younger adults. 

“People in their '20s are more than twice as likely to lose money to a fake check scam than people 30 and older”

According to the Federal Trade Commission (FTC), people in their 20s are more likely to lose money to a fake check scam than people 30 and older. The 20 – 29 demographic reports losing more money to check fraud than any other type of scam.  

Why? People in their 20s are less familiar with check writing, which means they’re even more unfamiliar with check processing. Checks scams often involve an offer of employment, which might appeal to younger adults, especially those strapped for money. The FTC also reports about half of the people who reported a fake-check scam in 2019 had been offered a job or some other opportunity to earn cash, such as being hired as a “mystery” shopper or participating in “car wrap” advertising.

Check Fraud and Identity Theft

In most cases, financial institutions (FIs) will work with customers to replace stolen funds. However, victims of check fraud stand to risk losing more than just money. 

Most paper checks include the victim’s name, address and bank account information — which is all a scammer needs to create fraudulent passports, legal documents and driver’s licenses. The fraudster then uses these documents to open bank accounts and apply for loans, credit cards and other types of digital fraud — all in the name of an unsuspecting victim. 

In 2020 alone, one personal finance company reported over 1.4 million identity theft complaints in the U.S., costing Americans $56 billion.

Tips for Prevention 

The best way to avoid check fraud? 

“The best advice I can give consumers who want to avoid falling victim to these schemes is to avoid mailing checks if you can,” says David Maimon, the man behind Evidence-Based Cybersecurity Research Group, the organization that spotted last year’s mailbox theft ring ...  

Another tip: whenever possible, opt for electronic payments that offer an easier and faster way to pay bills without broadcasting your sensitive financial information. FIs provide a growing number of ways to transfer money to friends and family electronically, and many now even offer ways to transfer money internationally. While digital payments are not 100 percent risk-free, they can sidestep the fraud risks associated with often stolen paper checks.

In these unavoidable situations where you may not be able to avoid using a paper check, following these basic steps can help protect you and your business:

  • Keep a detailed record of all the checks you write.
  • Hand-deliver your checks to your local post office or deposit your mail close to pick up time.
  • Monitor bank transactions closely.
  • Use a fraud prevention gel pen so your personal information cannot be erased.
  • If you receive an unexpected check, verify its authenticity before depositing.
  • Hold items for pickup at your local post office.
  • Request signature confirmation upon delivery
  • File for a change of address when moving.
  • Verify the bank’s contact information online before depositing. Never use the contact info on the check itself, which may also be fraudulent. 

If you believe you may be a victim of check fraud, take these three steps:

     1. Stop the payment immediately. Contact the payment provider to cancel the order. Ex. If   you paid by money order, contact the company you used to reverse the payment. 

      2. Report the fraud. Notify the bank whose name is on the check in question and file a complaint with the website or service where you came into contact with the scammer.

      3. Start a fraud alert. To protect your identity from being stoles, place a fraud alert on your credit reports with one of the three credit bureaus. (Equifax, Experian and TransUnion)

Next Steps

Credit scores help determine access to the financial mainstream, but even one late payment can tarnish an otherwise solid credit history. Get the lowdown on how credit scores can affect your financial well-being.

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