People have used checks as a form of payment since medieval times. Paper checks haven’t changed much since then. But in 2022, the U.S. Treasury Department saw an 84% increase in check fraud, often facilitated by online social networks.
Read on to learn how criminals are stealing and “washing” checks, plus what you can do to better secure your company’s finances from this type of fraud.
How Are Checks Stolen?
Criminals are stealing checks from mailboxes. In some cases, they’re simply grabbing them from the mailbox at your home or business. They may “fish” letters through mail slots of community mailboxes or even the blue USPS mailboxes.
Additionally, criminals target mail carriers to steal their universal arrow keys, which they use to open cluster mailboxes on their route. Cybercrime experts see these keys selling for between $1,000 and $7,000 online via illegal-market networking sites.
Once a criminal obtains a check, they may keep it for their own use or sell it online. Personal checks sell for as much as $250 each. Business checks can go for up to $650.
Criminals may use nail polish remover or other chemicals to “wash” the name and payment amount from a stolen check. Then they fill it in with their own name and the dollar amount of their choice. Other fraudsters scan or copy a stolen check to print multiple fake checks payable from your account.
Some brazen offenders will cash or deposit a stolen check themselves but most hire “walkers” to do the job for them. Walkers may be recruited on the streets but most often they’re found via social networking sites. They’re paid a fee to cash the check or deposit it in the criminal’s account on their behalf.
What Are the Impacts of Check Fraud?
In most cases, your bank will cover you the first time a check is stolen. You will likely have to cooperate with the bank to prosecute the check thief if they’re identified by law enforcement. This exercise can be time-consuming and resource-intense for a business.
If you experience check fraud more than once, your bank may not cover your losses a second time and you may be liable for the amount stolen.
Check fraud costs an organization money, time and productivity. Financial teams must close old accounts and open new ones while stopping payment on outstanding checks and re-issuing them.
In short, check fraud is a costly and frustrating time sink for businesses with potentially long-lasting repercussions.
How to Prevent Check Fraud
Postal Inspectors recover more than $1 billion in counterfeit checks and money orders annually. You can help prevent check fraud at your organization with the following tips.
Don’t let checks sit in the mailbox for long periods. Pick up your mail promptly after delivery.
Put outgoing mail in the mailbox close to the typical pickup time. Blue USPS mailboxes are labeled with the times mail is picked up.
If you drop checks at the post office, walk inside and leave them in one of the indoor mail slots for increased protection. The blue mailboxes outside post offices are susceptible to break-ins.
If your office will be closed for a period with no one around to accept mail, set up a mail hold online for up to 30 days.
Alternatively, ask a trusted neighbor or colleague to pick up and hold your mail in your absence.
Check your financial accounts frequently for signs of suspicious activity. There are a number of fraud detection software options that can automate this process for you and send reports on potential red flags.
Make sure to reconcile your check register with your banking statements regularly.
Use dark ink and gel-based pens whenever possible. Don’t leave blank space in check fields. If your writing does not fill the whole area, finish it off with a dark line.
When cashing a check, don’t endorse it until just before you deposit it.
Order checks from reputable companies and choose designs with features to prevent counterfeiting.
Leverage technology and ditch paper checks altogether. With electronic payments, there’s less opportunity for fraud. Therefore, banks provide more thorough protection on electronic transactions.
E-payments are encrypted and safely transferred directly between banking institutions. There are exponentially fewer opportunities for thieves to access your account information compared to paper checks. Plus, creating a counterfeit electronic transaction from your account is less likely, involving much more skill and access to resources than paper check fraud.
More Benefits of E-Payments
Suppliers that accept e-payments from their customers see a variety of advantages, including:
Suppliers can receive and process payment 1-3 business days after payment approval with e-payment methods versus 10-14 days with paper checks. Plus, suppliers don’t need to make check runs when funds are delivered electronically.
Funds are transferred faster with e-payments and processing time is reduced. This helps businesses with cash flow and planning.
Support for Hybrid Work
With e-payments, your staff can work from home. You no longer need to be in the office to collect checks and deposit them at the bank.
The solution is clear. Businesses that adopt e-payments protect themselves against the recent surge of check fraud in the U.S.
Learn more about our AvidPay electronic payment network and how it can improve your payment processes here. Read up on how the AvidPay Network for Suppliers can streamline and digitize your accounts receivable systems here.