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What are Some Different Kinds of Check Fraud?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 September 2016
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Check fraud is an illegal crime that can take place in a number of different ways. Some of the schemes that qualify as check fraud are very simple, while others are much more complex. Here are a few examples of the different kinds of check fraud and how they work.

One of the most common types of check fraud employs a technique known as check washing to alter the face amount of the check. As an example, an account holder writes out a check in the amount of a thousand US Dollars (USD) The recipient of the check uses techniques to alter the check so that the payable amount becomes ten thousand USD. Because the check is an identifiable original instrument of the account holder, and the authorizing signature is obviously valid, banks would have no reason to suspect a problem with the check. Assuming that the account has enough funds to clear the altered check, the recipient can then take the money and run. The hapless account holder does not become aware of the fraud until after the fact.

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Another common example of check fraud involves mail theft. In this scenario, thieves intercept valid checks issued by a company to a vendor. The face value of the check is left intact, but the recipient information is altered to allow the thief to deposit the check into an account set up for the purpose of receiving the money. This type of approach can take longer to come to light, as the company may not check anything but check numbers and amounts before beginning a monthly account reconciliation. By then, the thief has withdrawn the funds, and closed the receiving account.

A variation of these kinds of check fraud is to steal valid checks and use them to create counterfeit checks that can be made out for any amount. Forged checks account for a huge amount of check fraud today. This type of operation requires a swift turnaround, as a company may notice a check clearing the corporate account with a check number that is out of sequence or has a face value that is not accounted for.

One final example of check fraud is old-fashioned check kiting. In this scenario, there is no thief who steals checks or alters them. Instead, an individual will set up two separate checking accounts. A check is written on one account and deposited into the second account, in order to cover other checks that were written on the second account. The next day, a check is written on the second account and deposited into the first account. This is to cover the initial kited check that was previously deposited into the second account the day before.

The rationale is that the process can be kept up until a paycheck or other source of funds comes through and renders the kiting of checks unnecessary. Many honest people are unaware that this activity is in fact fraud, simply because their intent is to make all the checks good eventually. Unfortunately, that does not always happen. Evidence of check kiting can lead to legal implications and fees that will do nothing to improve the financial condition of the individual, so this process should be avoided at all costs.

One important means of avoiding all kinds of check fraud is to make good use of check protection services. Your local bank will be able to help you evaluate your current practices and suggest different tools that will help protect from just about all kinds of check fraud. In many cases, these services are available at no charge, while others may require a small fee.

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anon22795
Post 4

how criminals are committing check fraud. Explain the methods that are being used to stop this crime.

jms6942
Post 3

Country of origin: U.S.A (California)

Bank: US Bank

mdt
Post 2

There are a lot of factors that come into play here. What are the terms and conditions your friend agreed to when he or she signed up for the account? What is the country of origin and what national banking regulations would apply? I would say that the quickest way to get to the bottom of how much liability the bank has is to see an attorney about this matter, pronto!

P.S. have the police caught the forger? If so, that might help matters a great deal as well.

jms6942
Post 1

A friend of mine had checks stolen. Then the guy wrote the checks to himself and forged my friends signature. Actually he just signed my friends name, it looked nothing like friends signature. He goes into a branch bank with one, they cash it! Then they go in to his bank, BINGO! again, Cashed. The bank is trying to tell him that they are not responsible they are calling it ID theft. I say that the bank failed to check signature card and they are making him pay. Total of 4 checks 2 x $500.00 1 x $800.00 1 x $450.00 Is Bank at fault?

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