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Check fraud is a financial crime that involves the illegal use of checks to obtain money or property dishonestly. It is one of the fastest rising forms of financial crime within all sectors, affecting individuals, businesses, and financial institutions. Global check fraud losses have topped $26 billion annually and are expected to continue to rise.
Understanding the different types of check fraud, recognizing warning signs, and implementing preventive measures can help reduce the risks of being a victim of this crime.
Check fraud can take various forms:
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• Forged checks occur when a fraudster signs or alters a check without the account holder’s permission, often using stolen blank checks.
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• Altered checks involve tampering with a legitimate check by changing details such as the payee’s name or the check amount.
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• Counterfeit checks are entirely fabricated, typically using sophisticated printing techniques.
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• Stolen checks are illegally obtained from mailboxes, businesses, or individuals and used fraudulently.
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• Scams include illegal cons such as check kiting and overpayment schemes.
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• Check kiting exploits the time delay between banks processing checks to create the illusion of available funds.
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• Overpayment schemes involve scammers sending a check for more than the agreed amount and requesting the recipient to return the excess funds before the check bounces.
There are notable differences between individual check fraud and business check fraud. Individual check fraud typically involves stolen or forged personal checks, often targeting unsuspecting consumers who may not regularly monitor their bank accounts. Criminals may steal personal checks from the mail, forge signatures, or alter check details to withdraw funds. Since individuals usually have limited financial resources and security measures, they are more vulnerable to such fraud.
On the other hand, business check fraud is often more sophisticated and involves larger sums of money. Fraudsters may counterfeit company checks, forge signatures of authorized personnel, or use insider access to manipulate transactions. Businesses that handle large volumes of checks are at a higher risk of employee fraud, check washing, and altered payee schemes. Because of the scale and complexity of business operations, corporate check fraud can lead to significant financial losses if not properly managed.
Red flags for both individual and business check fraud can include: receiving checks from unknown sources, inconsistent signatures, visible alterations, urgent deposit requests, and bank alerts regarding unusual check activity. By staying vigilant and questioning any suspicious check transactions, individuals and businesses can help to prevent potential fraud.
However, preventing check fraud also requires proactive measures. Individuals should use secure checks with features like watermarks and microprinting, monitor bank statements regularly, keep checks in a secure location, and limit the use of checks in favor of electronic payments. Businesses, in addition to the above precautions, should also implement internal controls such as dual authorization for check issuance, regular financial audits, and using fraud detection services like Positive Pay. Regardless of type, you should contact your financial institution immediately if you feel you are a victim of check fraud.
Check fraud remains a prevalent financial threat, but by staying alert to warning signs and adopting secure financial practices, individuals and businesses can safeguard themselves from becoming victims.
For additional information about online scams and cybersecurity visit our website: https://www.myunionstate.bank/services/mobile-and-online-banking/online-security-tips
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