Check Fraud is Highest with Paper Checks

Congratulations! You are a website’s lucky 10,000th visitor of the day and they are awarding you a million dollars – or so the pop-up on your computer screen says. Could this be the beginning of a check fraud?

Click through the window, deposit the check they send you, and you will be met with a request from the sender to wire a little bit of that award money back. If all goes according to the scammers’ plan, you will send them money in return before the check that you deposited inevitably bounces, leaving you to pay your bit of return money out of pocket.

Fall for this scheme, and you will join the ranks of the tens of thousands of Americans who are victims of check fraud every year. The number of checks that Americans write is falling every year, and yet, reports of check fraud are steadily rising.

Determining the exact number of cases of check fraud in a given year is extremely difficult, as check fraud can take many forms. There is forgery (signing a check without authorization), theft (stealing checks), paper hanging (writing checks on closed accounts), and counterfeiting (illegally printing checks with information from the victim’s account). And let’s not forget forget washing (chemically removing information from a check) and paper kiting (writing a check for nonexistent funds, then writing another check with nonexistent funds from a different account to cover the first check).

All told: paper checks are an incredibly unsafe method of payment. While the exact number of cases of check fraud (and the exact amount of money lost due to check fraud) will remain unknown, the National Consumers League believes check fraud to be the number one most common type of scam in America.

While pop-up window scams targeting individuals are often the first thing that come to mind when we think about check fraud, businesses are also highly susceptible to check fraud in all of its various forms. According to a survey conducted by the Association of Certified Fraud Examiners in 2016, a typical business loses five percent of its revenue to fraud in any given year. Asset misappropriation, which includes most forms of check fraud, is the biggest contributor to this loss of revenue.

To protect yourself and your business from fraud, you can keep your checkbook in a place where thieves could not find it, monitor your bank account regularly, and use fraud prevention pens that protect your checks from washing. You can take care to mail checks from the post office (and not from your mailbox, where thieves could steal them).

Still, there is no way around the fact that checks are a fundamentally unsafe method of payment. For in order to make a payment to a business, a check must pass through the hands of postal workers, employees of the recipient business, and bankers. Should any of those people pause to take a look at the check in their hands, they would see your name (or your business’), address, phone number, bank’s name, bank routing number, and signature. Anyone could easily commit check fraud with this information – and again, all that it takes to access it is a glance at one of your checks.

It is no wonder that checks are declining in popularity. While they were once the only non-cash payment instrument available, this is no longer the case. With today’s widespread electronic payment options, there is now no need to expose yourself to potential scammers by making payments with paper checks. Electronic payment has proven itself to be a safer method of payment, and so the time has come for us to leave checks and fraud behind.