As technological advances revolutionize banking and finance, enabling unprecedented efficiency and convenience, consumers must remain vigilant against emerging security threats. While check fraud has long plagued financial institutions, its evolution beyond traditional counterfeiting poses new challenges in the modern era.
Traditional methods of financial fraud, particularly check fraud, have resurged with alarming frequency. In the United States, check fraud accounts for 35% of all bank fraud, manifesting through various schemes, including forgery and counterfeiting.
An alert from the Financial Crimes Enforcement Network (FinCEN) highlights a nationwide surge in check fraud schemes targeting the U.S. Mail, signaling an urgent need for heightened awareness and proactive measures to protect consumers and businesses alike.
Check fraud remains alarmingly frequent due to a variety of factors:
- Low-Tech, High Impact: The low-tech nature of paper checks offers a path of lesser resistance for would-be fraudsters. Their relative ease of alteration has unfortunately made them favored targets in a world brimming with far more complex scams.
- Enormous Volume, Enormous Risk: Despite living in an increasingly digital age, 3.2 billion checks processed by the Federal Reserve in 2023 spotlight our continued reliance on them. It’s this volume that criminals exploit.
- Easy Access: A significant number of checks are pilfered from seemingly secure routes – your residential mailbox, the familiar blue drop-off boxes, or other collection points. Criminals can easily leverage uncomplicated tools and techniques to alter these checks and make unauthorized transactions.
- Rising Sophistication of Crime: No longer are criminals merely altering checks; they’re counterfeiting them, creating multiple layers of deception that range from double presentment fraud to synthetic identity fraud—a hybrid of authentic and invented details to create new identities.
Criminals, emboldened by the vulnerabilities of the postal system, have increasingly targeted personal, business, and government-issued checks, exploiting various methods to perpetrate fraud. From theft of checks from USPS blue collection boxes and unsecured residential mailboxes to the utilization of authentic or counterfeit USPS master keys, known as Arrow Keys, perpetrators employ sophisticated tactics to gain access to valuable financial instruments.
Once stolen, checks are subjected to various fraudulent schemes, including “check washing,” where ink is chemically removed to alter information, and counterfeiting, where routing and account information are replicated to create fake checks. These fraudulent activities not only result in financial losses but also expose victims to potential future schemes, such as credit card fraud and deposit account fraud.
Throughout 2020, Santa Barbara and Santa Maria witnessed multiple occurrences of mail theft from USPS boxes and neighborhood mailboxes. The following year, prompted by the arrest of a Santa Barbara resident for mail theft and various related offenses, the Santa Barbara County Sheriff’s Office disseminated tips on preventing such thefts.
Additionally, in 2022, a woman was apprehended for pilfering mail from mailboxes in Buellton. Given its persistent presence in the region, it remains imperative for individuals to proactively implement preventive measures to shield themselves from potential fraud.
The US Postal Service recently announced that they are implementing enhanced consumer protections to prevent mail theft which has led to the recovery of over $1 Billion dollars in counterfeit checks and money orders each year. The American Association of Retired Persons (AARP) has also provided valuable guidelines on how to protect yourself and report fraudulent activity to keep your mail secure.
For consumers, safeguarding checks and sensitive financial information is paramount. Simple precautions, such as avoiding leaving mail in unsecured mailboxes overnight and utilizing online banking for secure transactions, can significantly reduce the risk of falling victim to check fraud.
Businesses, particularly those with well-funded accounts, are prime targets for fraudsters seeking lucrative opportunities. Businesses can enhance their defenses against fraudulent checks and minimize potential losses by using online banking services coupled with fraud prevention tools like Positive Pay to detect and prevent fraudulent checks from being cashed.
Positive Pay works by matching the information on a check presented for payment to a list of authorized checks, ensuring only authorized checks are negotiated for payment.
Businesses can also use tools such as ACH payments when sending money to transact vendor payments, tax payments or payroll. ACH payments not only reduce fraud, they also speed up the transaction process.
If you must use checks, you can minimize the opportunities of check fraud by:
- Avoiding blank spaces: When writing checks, make sure to avoid large blank spaces on the number or amount lines to deter alterations. Clearly and snugly write out numbers and amounts to allow no room for fraudsters to add extra digits.
- Promptly reporting missing checks: If you notice a check is missing, it’s vital to report it as stolen immediately to your financial institution. This rapid response ensures the check can be flagged, minimizing the risk of fraudulent transactions.
- Vet anyone who enters your home or business: If you allow a housekeeper, contractor, or other service persons inside your home, run them through a background check to determine how trustworthy they may be. And keep important documents, including checks and bank statements, locked up.
- No checks in cars: Never leave your checkbook out in public, and especially not stored in a car. It’s just too easy for fraud artists to break into the vehicle and steal your checks.
- Avoid mailing checks from an accessible mailbox:Always mail checks at the post office, if possible, or try to mail shortly before postal pickup.
- Consider using “Informed Delivery”: The U.S. Postal Service offers a free service that sends you a picture of your mail before delivery, so you can determine if anything is missing after it arrives.
- No Sensitive Data: Never write your Social Security number or driver license number on a check. It’s just too easy for check fraud artists to steal the check, get your Social Security number, and then commit identity theft.
- Securely disposing of check-related documents: Always shred any check-related documents before disposal to prevent identity theft. Sensitive financial information should remain confidential.
- Consider alternate methods of payment: Use a debit card with enhanced fraud protection or digital wallet which hides all your account information from the vendor and allows person-to-person transactions.
- Use a P.O. Box: Post office boxes offer an easy way to bypass the last mile to unprotected mailboxes. They also offer a way to keep physical addresses off check stock when printed.
American Riviera Bank stands committed to assisting clients in navigating the evolving landscape of financial fraud. Through informative resources and proactive measures, such as regular updates on emerging threats and personalized fraud prevention strategies, we strive to empower individuals and businesses to safeguard their financial assets effectively.
“In 2023, our fraud team prevented over $2 million in potential check fraud losses, which is an astonishing increase over the $1 million in potential check fraud our clients experienced in 2022,” said Laurel Sykes, Executive Vice President and Chief Risk Officer for American Riviera Bank.
“At ARB we continue to make investments in technology to help our clients stay ahead of fraud trends. Artificial intelligence is being leveraged to identify potential changes in account activity, and we are investigating optical character recognition functionality to identify checks that have been potentially altered or counterfeited.”
As check fraud continues to evolve and adapt to technological advancements, collaboration between financial institutions, law enforcement agencies, and consumers is essential in combating this pervasive threat.
Each recommendation, from promptly reporting missing checks to utilizing online banking services with fraud prevention tools, holds the potential to significantly reduce the risk of falling victim to fraudulent activities.
