Cases of check fraud escalate dramatically, with Americans warned not to mail checks if possible

by Ryan Lee
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check fraud

The issue of check fraud has witnessed a significant escalation, prompting a warning to Americans to avoid mailing checks whenever feasible. Organized crime has seen a resurgence, leading to heightened concerns among small businesses and individuals, who are now adopting additional safety precautions or opting to eliminate the use of mail for sending checks altogether.

Financial institutions reported approximately 680,000 cases of check fraud to the Financial Crimes Enforcement Network (FinCEN) last year, marking a substantial increase from the 350,000 reports in 2021. Concurrently, the U.S. Postal Inspection Service received around 300,000 complaints of mail theft in 2021, more than double the previous year’s total.

During the early stages of the pandemic, government relief checks became attractive targets for criminals. Since then, the situation has worsened, leading postal authorities and bank officials to caution Americans against mailing checks, encouraging them instead to utilize secure mail drops, such as those within post offices. As instances of fraud multiply, victims are experiencing longer waits to recover their stolen funds.

Check usage has been steadily declining over the years as Americans have increasingly turned to credit and debit cards for their transactions. According to the Federal Reserve, Americans wrote approximately 3.4 billion checks in 2022, a significant drop from nearly 19 billion checks in 1990. However, the average amount written on these checks has risen from $673 in 1990 (equivalent to $1,602 in today’s dollars) to $2,652 last year.

“In spite of the declining use of checks in the United States, criminals have increasingly targeted the U.S. Mail for check fraud since the COVID-19 pandemic,” cautioned FinCEN in a February alert.

Checks are still widely utilized by small businesses. Eric Fischgrund, the owner of FischTank PR, a 30-person public relations firm in New York, had 15 checks intended for him stolen after they passed through the same Postal Service distribution center. Criminals successfully cashed ten of them. Fischgrund discovered the issue in April when several clients, who had never been late with their payments, missed them. While the Postal Service conducted an investigation, Fischgrund managed to recover approximately 70% of the revenue, though some cases remain unresolved.

According to the investigator handling the case, the perpetrators employed technology that erased the ink in the “to” field of the checks, allowing them to write in fake names. As a result, FischTank instructed all clients to switch to electronic payments due to the check fraud incident.

Fischgrund, who had not encountered check fraud in his nearly ten years of running his business, stated, “I don’t think we’ll ever go back to asking for checks as an option.” He has now included a clause in invoices and new client contracts requesting electronic payments exclusively.

Today’s check fraud criminals are not small-scale operators or individuals like the character played by Leonardo DiCaprio in the 2002 film “Catch Me If You Can,” who counterfeited checks from his hotel room and apartment. These criminals belong to sophisticated criminal operations, infiltrating post office distribution centers, establishing fake businesses, or creating counterfeit IDs to deposit checks. The individuals who cash these fraudulent checks, known as “walkers,” receive training to appear more legitimate.

In one instance last year in Southern California, nearly sixty individuals were arrested for committing over $5 million in check fraud against 750 people.

Criminals obtain checks or personal identification information by stealing mail from U.S. postal boxes, specifically targeting envelopes that appear to contain bill payments or checks.

The most prevalent type of check fraud is known as check washing, where a criminal steals a check from the mail and alters both the payee’s name and the monetary amount.

Some criminals go a step further by

Frequently Asked Questions (FAQs) about check fraud

What is check fraud and why is it escalating?

Check fraud refers to the illegal act of altering or manipulating checks for financial gain. It is currently escalating due to a rise in organized crime that targets mail systems, increasing the risk of theft and fraud.

How are criminals obtaining checks and committing check fraud?

Criminals obtain checks by stealing mail from postal boxes, specifically targeting envelopes that appear to contain bill payments or checks. They then alter the payee’s name and the monetary amount through techniques like check washing, enabling them to fraudulently cash or deposit the checks.

What are the consequences of check fraud for individuals and businesses?

Victims of check fraud may face financial losses and endure delays in recovering stolen funds. For businesses, check fraud can disrupt cash flow and damage relationships with clients. It can also result in potential legal issues and the need to implement additional security measures.

What precautions can individuals and businesses take to prevent check fraud?

To prevent check fraud, it is advised to avoid mailing checks whenever possible. Consider using secure alternatives like electronic payments. For businesses, opting for services like “positive pay” with a bank’s business checking account can help pre-authorize checks and minimize the risk of fraudulent activity.

What actions are banks and authorities taking to combat check fraud?

Banks are actively monitoring for signs of check fraud, both at branches and through mobile check deposit services. They train employees to identify red flags and deploy software to assess the risk associated with checks. Authorities are also investigating and apprehending individuals involved in organized check fraud operations.

What should I do if I suspect or become a victim of check fraud?

If you suspect check fraud or become a victim, contact your bank or financial institution immediately to report the incident. They can guide you through the necessary steps to protect your accounts and initiate the process of recovering any stolen funds. Additionally, it is advisable to file a report with local law enforcement and follow their instructions for further action.

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