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There are often cases of fraud relating to checks that many people face these days. Such crimes by fraudsters to steal money from businesses and people are on the rise.
The fraudsters use various means to pilfer money. It can impact you as an individual, your financial institution, or your customers. So knowing about the various types of fraud to be cautious is crucial.
The knowledge of the means to identify a fraud or the ways to tackle it can be of paramount importance if you face such a situation.
If you were to define check fraud to someone, what would you say? Check fraud definition in simple terms is a crime of deception. It means the illegal use of checks, not necessarily for personal vendetta but to accrue money from someone.
The most common form of such fraud involves the attempt of a person to carry out a purchase or transaction using checks as a financial instrument.
These checks are either stolen, faked, altered, or are not valid. A crucial aspect to note here is that the fraud can take place in numerous ways, and the context may be different from purchases. Check fraud may be a felony or a misdemeanor based on the laws governing the state and the specific circumstances.
The advancements of processes and the adoption of newer banking technology have given rise to the evolution of check fraud too. The fraudsters are getting more frugal in terms of their ways to capture the check fraud victims.
A common pattern that the investigation of check frauds has put forth is that the chiselers ask for higher value deposits for a particular service than its actual worth. In most cases, such people are unknown to you. They put forward a well-rehearsed story with an explanation concerning the utility of the money.
Extra money sought from the victim to cover the fees or taxes for the purchase of supplies or something else is very common. A predominant factor is the look of the check. The checks, be it business or personal, look similar to the original. How do you differentiate them?
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You can have check fraud protection when you delve a little deeper and understand the types of check frauds. Knowing about the frauds can help you check account fraud and identify any anomaly. Understanding how does check fraud works can help you better mitigate risks.
It refers to the conditions where an account holder deliberately writes a bad check on their account. A prevalent phenomenon among frauds is the opening of accounts for the sole purpose of writing bad checks. A great idea is to set a precedence of not accepting checks under a stipulated number or starter checks from the customers.
Although the most prevalent method for paper-hanging frauds is opting for checks from new accounts, another one involves issuing checks from closed accounts. The issuer writes such a check being well aware of its nature and the absence of the funds to cover the check.
Educating the staff with check fraud training, focussing on countermeasures, and identification of such cases can help mitigate the risk. Another aspect of opting for paper-hanging frauds can be for overdrawing the account. It is in practice for the established accounts with a balance. Checking the history of check fraud for new clients concerning large transactions can be useful.
One of the most common types of check fraud includes the forging of checks. People pursuing such a fraudulent practice forge someone else’s signature on the checks. The check can then either go to their bank accounts or to any business for purchasing goods or services.
Another way forged checks are in use is as financial instruments for endorsements. They can write the name of the endorsee and put a forged sign in the place of the account holder. The next step involves scouting for someone willing to accept such an endorsed check. The forger may also dub himself as the account holder and encash the checks.
If you explore the world of check fraud scams, check kiting is bound to pop up. It involves two different accounts. The ownership of the accounts can be either by the same person or different individuals.
They necessarily write a personal check from their account to another. The motive behind the act is to create a false illusion of the presence of balance in the second account. Post the transaction, the scammers withdraw and abscond with the cash or continue to kite multiple times. The withdrawing bank can know of this depository check fraud only later by when the transaction may already be complete.
Theft of checks involves forgery by fraudsters. It involves stealing the physical checkbook or the account details of the victim. While stealing the blank checks means forging the signature of the account holders, the account details may aid to print a fresh checkbook. This act of counterfeiting can allow the thieves to use the checks at will. Counterfeit check frauds make up the majority of this particular fraudulent practice.
Identity theft can lead to the creation of fake bank accounts. Such accounts entail the user to pursue their unscrupulous deeds and write bad checks from the fake account.
By the time the victims report check fraud, the fraudster is already gone. The identity-compromised person has to deal with the repercussions of such check-cashing fraud.
Check fraud facts can reveal to you another fraudulent practice where a written check takes advantage of the float time. Account-holders float such a check to buy time till payday, which can be just a day or two away. Such practices can be more elaborate with the involvement of other check frauds types.
Such schemes may not result in any net loss to the bank and may not warrant any stop check fraud requests from the bankers. But the account holder overdraws for a short period to meet his needs. Financial institutions can be careful about such scenarios, as a delay in paycheck encashment can lead to bounced check fraud.
The rise of fraud has led to banks opting for check fraud software and tools.
These scams involve con artists going above and beyond their normal gigs. A series of steps lead them to their victim’s bank account. As a first step, they approach the victim and offer them a job. Such jobs often involve being a mystery shopper or testing wire transfers.
Sample of the fake US Stimulus Check
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In the meantime, they send fake paychecks along with instructions to the victim. It generally entails the testing of a wire transfer by sending money to someone else by the victim. The fake check carries an amount that should cover the wire transfer amount as well as the pay for the job. Though as the check bounces and the victim is left with nothing along with losing the wire transfer funds.
These fraudsters often have websites with flashy advertisements and tall claims. A good practice can be to opt for the services of companies that have online fraud website checkers.
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Account hijacking is similar to identity theft. However, in this type of bank check fraud, the difference is that the scammer takes over the victim’s bank account. The access grant can happen either through online banking or a physical visit to the branch. They can draft fake computer checks for offline withdrawal or can pursue online check fraud through standing instructions.
The scammers specifically target the victims to inform them about their winnings in a lucky draw or lottery. A check of the winning amount arrives at the victim’s address with a convincing endorsement stamp. The victim has to pay a small amount to cover the charges for fees and taxes. By the time they realize that the winning amount check is fake, the processing fees are already deducted from their account.
Fake blank lottery check mockup
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Mobile payments are also prevalent these days, and such fraudsters may trap you into mobile check deposit frauds. A fraud website checker can aid you in such scenarios to identify the authenticity of such fraudulent lottery scams. If you take actions proactively, with the help of check fraud laws, a check fraud prosecution case can be initiated against them.
Such practices fall under check tampering fraud. The fraudsters use chemicals to wash off particular pieces of information. Once the printed information ceases to exist, they put new information based on their requirements. They may change the name of the beneficiary or the amount.
Financial institutions are going for anti-fraud checks post the rise of such scams. These checks with various measures in place can help detect any overwriting or manipulations.
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The rise of fake check frauds has led banks to redesign their checks. There are various print and paper-based security features that the checks are laden with nowadays.
The print-based security features include:
Padlock Icon - a universal check printing industry symbol. Helps define and identify a specific check’s multiple security features.
Warning Borders - a tool to intimate both the bank and recipient of the document about the security features of the check.
Micro Printing - the fine print of copy that is legible under magnification but turns blur or unrecognizable when scanned or copied.
Ghost or Artificial Watermark - An opaque ink custom ghost watermark that a copier can not reproduce.
Thermochromatic Ink - helps confirm the authenticity of the document. Its formulation enables it to fade away when exposed to heat or rubbed.
Prismatic Printing - a pantograph background using single or multiple colors. The scanners or copiers can not recreate the output with such special varying effects.
Bleed Through Numbering - Creation of the image of numbers on the back of the sheet using prints in red and black that penetrate through the paper.
Security Back Printing - using a screen to lightly reverse print a word. When scanned, such screen words drop out and can not be reproduced.
The paper-based security features include:
Toner Adhesion Coating - special coating applied on both sides of the paper, helps prevent unwarranted removal of laser printed toner and better toner adhesion.
Void Background - using hidden word technology the word ‘Void’ is put in as a hidden pantograph. When the check is scanned the letters appear in the output.
Visible Fibers - these special authenticity ensuring features allows the placement of fibers of various densities, lengths, and colors in the document. These are visible to the naked eyes.
True Watermarks - a dual-tone watermark that is visible from both sides of the paper. Is deemed impossible to copy and can help in instant authentication.
Fluorescent Fibers - blue or yellow fluorescent fibers that are only visible under a special light.
Chemical Reactive - a blot or stain appearing on the paper when exposed to bleach or any chemical.
Color Basketweave Safety Pattern - color patterns present on both sides of the paper that makes forgery by cut and paste methods extremely difficult.
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Banks are liable to make the deposited funds available as per law when someone presents a financial instrument. When they make the funds available in your bank account and update the system as the check cleared, it does not necessarily mean that it is a good check.
Identification of a cashier check fraud or a business checks fraud can take weeks. The scammer skims money by that time, and you end up paying the check fraud penalty to the bank. You can avoid these consequences of check fraud by choosing not to accept checks from someone unknown or not trustworthy.
Gift card scams entail payment in place of the cards. A gift card has only one function that is to serve as a tool for gifting. You may get a check fraud phone call demanding money against the gift card. As an immediate step, get an IP fraud check of the domain that issued the gift cards if you feel there’s something fishy with the issuer.
Alternatively, you can also contact and enquire about such activity. A denial would mean that the company’s gift cards are in use for fraudulent practices by some scammers. This way, you can avoid check fraud.
If you have undertaken any transactions concerning the gift cards, you can enquire about where to report check fraud, and based on the federal check fraud laws you can file a complaint.
If the transactions took place via a wire transfer, you can reach out to the money transfer company and report the fraud. It can be helpful to keep the following numbers handy for avoiding trouble in such situations:
MoneyGram complaint department - 1-800-666-3947
Western Union complaint department - 1-800-325-6000
Though it is unlikely to take place still you can ask them to revert the transaction.
If you have undergone the transaction through money orders, you can contact the companies which issued the same. If you are prompt enough, you can also opt to try and stop the delivery of the money order. The U.S. Postal Inspection Service is available at 877-876-2455 if you choose U.S. mail for sending the envelopes carrying the money order checks.
These can serve to be useful tips to avoid check fraud and help you with countermeasures, unfortunately, if the same happens.
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Though it may seem appropriate to pass on the check fraud news to the Federal Bureau of Investigation or FBI, it is better to report it to the concerned authorities. The agencies or authoritative bodies that tackle cases of fake check scams are:
The U.S. Postal Inspection Service
The Federal Trade Commission
Your state Attorney General
Is check fraud a felony? The answer is yes. However, check fraud punishment can depend upon the intent of the person involved in the act. If someone conducts such an activity knowingly and takes money from someone else’s account, then it will have repercussions.
They can be subject to criminal consequences, and the check fraud statute of limitations will help stipulate the check fraud sentence. The outcome can be either serving a check fraud jail time or a criminal fine. Amount of the money involved in the scam determines the severity of the punishment.
The lack of knowledge, in the case of a person who presents such a check unknowingly, can work in their favor. The circumstances and law shall however help determine it.
The level of crime helps determine the penalty for check fraud. Check fraud can either be a felony or a misdemeanor. Misdemeanor check fraud attracts a punishment of under one year of jail time along with fines for the crime. Felony check fraud means a prison sentence for more than a year and higher fines.
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In either of the cases, the defendant has to pay back the amount that the victims have lost due to the fraud. Some state laws also differentiate between a felony or misdemeanor check fraud based on the value of the scam.
Thirty-five percent of all bank frauds are due to check frauds. To protect the people in your ecosystem, whether they are the customers or the vendors, knowledge about the check fraud countermeasures is crucial. Choosing fraud IP checks can help identify most modern-day check frauds.
Being cautious about the deals and the people from whom you collect the checks can help you to save yourself from getting mugged by such fraudsters. The laws may differ in different states, but choosing to get help from the authorities can facilitate getting back the money.