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Trending Check Fraud Scams & Related Best Practices

By Ryan L. Kaiser, CFE, AVP, Fraud Risk Officer, Canandaigua National Bank & Trust

Check fraud remains one of the most common schemes that victimize consumers and businesses every day. The Financial Crimes Enforcement Network (FinCEN) reported 680,000 cases of check fraud reported by financial institutions in 2022, nearly doubling from those reported during 2021. You may wonder, with all the new forms of technology that are available today, why is this method of fraud increasingly popular? Like many forms of white-collar crime, check fraud is a relatively low cost, low barrier crime to commit with extremely high reward potential for criminals.

In addition to being low cost and low risk for criminals, there are many avenues that criminals can use to perpetuate these schemes —from document theft and dumpster diving to buying account numbers and other sensitive information off the Dark Web to manufacturing surprisingly convincing counterfeit checks with affordable printing equipment — the options and opportunities are vast. In addition, payments made via check are still surprisingly common; a survey run by the Association for Financial Professionals concluded that in 2022 approximately one in three B2B payments were remitted via check. All this adds up to huge opportunities for criminals.

What Is Check Fraud?

Check fraud comes is a variety of forms including but not limited to the following common methods:

  • Forgery of an account holder’s signature on a stolen check
  • Altering the amount or payee on a legitimate check
  • Illicit manufacture / negotiation of an altogether counterfeit (fake) check
  • Intentional issuance a check off an account which will knowingly not successfully transact, for reasons such as insufficient funding, closed account, or frozen account

With this simple list of methods, criminals will enlist other individuals to handle the checks themselves, distancing themselves from the fraudulent financial transactions. In turn, these individuals will potentially be victimized as well by taking direction from the fraudster on either cashing or depositing the check and moving those funds elsewhere at the fraudster’s instruction.

Common Check-Related Scams

  1. Employer fraud scams: For example, an individual is hired for a ‘personal assistant’ job. Upon being hired, a check is provided, and the victim is directed to purchase equipment or use funds to purchase gift cards for someone else’s benefit.
  2. Overpayment or pay-and-return scam: An item is purchased with a check for an amount greater than the value of the item for sale. The criminal requests a refund for the difference of the purchase price and check amount, and days later the check is identified to be fraudulent.
  3. Lottery/Sweepstakes scams: A mailer is received by the victim which contains a check stating that taxes or a fee just need to be paid after cashing the check. After payment is remitted, it is discovered that the check was illegitimate, leaving the ‘winner’ out the funds.
  4. Inheritance scams: Similar to the lottery scam, a check is provided by a bad actor due to the passing of a ‘distant relative.’ Typically, the fraudster provides instruction for paying a sizeable tax on the inheritance, a small portion of a supposed large payout.

How To Stay Protected

  • Strongly consider not accepting a personal or business check at all for the sale of items on websites such as Facebook Marketplace or Craigslist. Instead, require cash or electronic payment.
  • If you do accept a check as payment, check with the bank that supposedly issued the check to make sure it is real and valid.
  • Consider how and why you received the check, including the story behind the payment. If your gut instinct is that something feels ‘off’ then do not accept the payment.
  • Never use funds from a check to send gift cards, money orders, cryptocurrency, or to wire money to someone to directs you to do so.
  • If you receive an unsolicited check in the mail from someone you don’t know, be extremely skeptical.
  • If you are unsure about the legitimacy of a check or are confused about a story relating to a check you received, consult your banker and have a conversation to see if any additional due diligence can be performed for your protection.