Check Fraud Is Up 84%. Here's How to Protect Yourself

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KEY POINTS

  • Check fraud is nothing new, but social media has made it easier to organize.
  • Check washing involves changing the name of the payee, and often, the amount of the check.
  • The United States Postal Inspection service recovers more than $1 billion in counterfeit checks and money orders every year.

You can safely assume the bad guys are hard at work.

Trillions of dollars in COVID-19 relief funds have breathed new life into an old scam: Check fraud. Using statistics from the Financial Crimes Enforcement Network, CNBC notes that banks reported nearly 250,000 cases of check fraud in 2021. By last year, that number had skyrocketed to nearly 460,000 cases. That's an increase of 84%.

21st century criminal enterprise

Check fraud is nothing new, but social media has made it much easier for the bad guys to organize and execute their theft. While organized crime has used sites like Facebook to plan schemes in the past, mainstream social media apps are not the "go-to" spot for criminals looking to score.

Today, the bad guys are turning to Telegram, a multi-platform messaging app founded by Russian entrepreneur Pavel Durov. While Telegram first debuted in 2013, the company now claims to have about 550 million monthly users.

The appeal for some users is Telegram's unrestricted nature. For example, there are at least 30 channels dedicated to sharing the latest techniques to commit bank fraud.

The app makes it easy for users to send encrypted messages to individuals as well as groups. It's big with criminals because it allows them to do business anonymously. It's next to impossible for police to trace a message back to the user.

Check washing

Check fraud frequently involves "check washing." According to the United States Postal Inspection Service (USPIS), check washing involves changing the name of the payee and often the dollar amount on a check. Once those changes are made, the criminal deposits the check into their own account or into the account of someone they know.

Criminal organizations have a multitude of ways to wash checks, from chemically removing the actual recipient's name, to using copiers or scanners to print fake copies of checks. USPIS says that it recovers more than $1 billion in counterfeit checks and money orders every year.

And that's where apps like Telegram come in. Criminals go to Telegram looking for "walkers." These are the people who get paid to make trips into banks to cash bogus checks. The bad guys often recruit the elderly and homeless to work as walkers because those are the groups most in need of money and most willing to work for whatever the criminals offer them.

An elaborate scam

Walkers are taught to provide a combination of real and fake personal identification to open bank accounts. The information that's real is just enough to convince a bank that they're legitimate. The fake information is designed to prevent law enforcement from tracking them down.

By the time a walker enters a bank to cash a bogus check, they're familiar faces and less likely to raise suspicion. If they're good at what they do, so-called brokers sell their services to other criminals who also need walkers to do their dirty work.

The scheme sometimes involves having a contact inside a bank, an employee who checks customer account balances to make sure that fraudulent checks don't bounce.

How to protect yourself

No one believes they will become a victim of check fraud, which only makes the criminals' job easier. Here are some of the ways you can make it tougher for thieves to get your money:

  • If you're ever contacted by someone claiming to be from your bank, provide them with no information.
  • Do not leave your receipt at an ATM. It contains just enough account information to give a smart criminal ideas. For example, most ATM receipts include the last four digits of your account number, your checking account balance, and where you made your last withdrawal.
  • Use direct deposit to get paid by your employer.
  • If a check is lost or stolen, report it to the bank immediately.
  • Store checks, deposit slips, bank statements, and canceled checks in a secure, locked location.
  • When you have new checks made, never include your Social Security number, telephone number or driver's license number. In the wrong hands, this information can be used to open a new checking account, credit card, or loan in your name.
  • Properly dispose of canceled checks until you need them for tax purposes. In that case, lock them away.
  • Regularly monitor your bank account, looking for any irregularities.
  • Do not mail bills from your mailbox at night. This is one of the ways criminals are able to get their hands on checks. Your best bet is to mail bills directly from a post office or to use your bank's online bill pay service.
  • Make it tougher for a criminal to change information on a check by using dark ink.
  • Don't leave any blank spaces when you write a check. For example, if you make a check out to Mary Smith, fill in the rest of the space with a dark line.
  • Never make a check payable to cash. If it's stolen, anyone can cash it.
  • Don't endorse a check until you're ready to cash or deposit it.
  • If anyone pays you with a cashier's check, have that person accompany you to the bank. Do not accept a check as payment unless it can be verified, even if they've provided you with identification.

Given the amount of money lost to check fraud it's year, it's no surprise that crooks are upping their game. Use their enthusiasm for theft as the motivation you need to protect your bank account.

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