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There are a lot of stories in the media about credit card numbers being compromised or stolen, or about some warehouse operation in New Jersey cranking out fraudulent credit cards.  Guess what?   Check fraud is much, much more prevalent.

Question:  Total check fraud losses exceed what amount per year?

  1. $100 million
  2. $500 million
  3. $1.5 billion
  4. $20 billion

The answer is d.  A staggering number, for sure.  Credit card fraud?  The answer is c.  Now do you see the difference?

Ok, last one.  Bank robberies?  The answer is a.  What is really interesting is that the jail time for answer a. is so much higher than from answer d.  It’s not even comparable.

Check payments are by far the most popular form of payment in the United States.  Nobody knows this better than criminals.  And, guess what?  They also know that the risks are low and the penalties are laughable.  Only 2 percent of bad check passers are arrested, and the conviction rate of that 2 percent is pathetic.  If convicted, probation is a popular punishment.

What adds to this great criminal enterprise is that anyone can order anyone else’s checks! We’ve made it really easy for people to do so…and, we’re the only country in the world that makes it so easy.  In every other country, you have to go to the bank and pick up your checks.  Not so in America!  Just get someone’s information and order 100 checks for $4.95 from Deluxe!  And, if you think it is hard for a professional criminal to get your routing and account number, then, I am sorry to say, you are very naïve.

Does that mean that anyone you write a check to can order checks with your account numbers on them?  Yep, that’s correct.  So be careful who you give a check to.

Adding to this problem, tellers at banks are not what they once were.  Tellers used to be trained and were often long-term employees of the bank, having many years experience.  And, they could more easily decipher a fake check that was created by a forger using paper and ink.  Today, tellers are young, not trained, part-time, and technology makes it an unfair game in favor of the criminal.  Oh, and most checks are processed through processing centers where no human being even sees the check.  It’s no wonder we’re drowning in check fraud.

So, what can you do about it?  Well, although it is tough to completely cut out the risk, it can be managed:

  1. Order your checks directly from your bank.  And, ask for checks with the maximum number of security features they offer.  Most of the time, they can be pretty good.
  2. Don’t ever let anyone see your deposit slips.  Most people think they are little risk.  They are not.  See that line “cash back”?  I can try to deposit a bad check to your account, and if your account has a balance in it, I can get cash back.
  3. Any check that is outstanding for > 180 days – put a stop payment on it.
  4. Monitor your bank activity daily, or if that is not possible, at least once a week.  Anything funny?  Call the bank immediately.  Most banks have some sort of fraud protection…ask them what their fraud protection/insurance is before opening an account.  Shop around.
  5. Don’t make it obvious if you are mailing checks or deposits (or deposit slips).  Criminals can go through the mail and look at addresses or memos below addresses for mail they should steal because they likely have checks in them.
  6. Protect your signature.  Be aware that your signature can be valuable.  There’s no need to let it float around out there when not necessary.  On one occasion, a business writer got the Forbes Magazine’s controller’s signature by overpaying a subscription and then getting a refund check back.  He lifted the signature of the controller and was able to cash a fraudulent check from Forbes for over $30,000. He cashed it without any issues.  Not very hard.

Now, for you forensic enthusiasts out there that want to know more about check fraud, here are some fun facts:

Criminals can often get real U.S. checks, change the amounts on them, and deposit them in countries without extradition rights.  There’s nothing that can be done about this.  It is an easy scam that happens very often.  The money cannot be recovered and the criminal is never charged with anything.

  • That guy that knocks on your door to clean up your leaves or mow your lawn?  He may just be after your check so he can get your routing and account number.  This is a common occurrence.
  • You are ten times more likely to be targeted by, or followed by, a forger if you drive a fancy car, like a Jaguar or Porsche.
  • A test was conducted in Houston, TX, in order to prove a point about check processing centers.  Checks were signed “I’m Stealing Money” and the memo said “Fraud”.  100 checks passed through, all without an issue.  Point proven.
  • Forgery is very easy today.  Laser printers that use toner don’t put any ink into the paper.  The toner sits on top of the paper, making it very easy to remove and “replace” the dollar amount with an amount the criminal finds more suited to his/her individual needs.
  • When paying your taxes, don’t ever write “IRS” as the payee.  The “IRS” can easily be changed to “MRS Smith” and cashed by someone else.  Instead, write, “Department of the Treasury, Internal Revenue Service”.
  • Most forged checks don’t have perforated edges.  Real checks do.
  • The old trick “two signatures required for checks over $10,000” just means the forger has to put two signatures on the check.  While laughing…
  • One of the easiest ways to get a company’s bank information is to ask for it. Call the company’s Accounts Receivable department and tell them you need to wire money to them for a deal you engaged in with the owner/president/CFO.  They will most likely cooperate and give you all the information you need.

Is this a complete list?  Of course not…it’s just a very small sample.  But I am sure you get the point.

If you own a business, put your employees that handle cash transactions through formal training so that they are aware of the scams, as well as the information that needs to be safeguarded.

Bottom line is that it is not hard to steal money with paper checks.  The best thing you can do is order checks with the most advanced security features.  It’s well worth the investment.  If someone tampers with them, they won’t go through the banks scanners.  Implement positive pay with the bank so that you have to clear every check you write before it is actually debited from your account.  And, reconcile your bank account daily, or as often as you can.  Check writing is still on the rise…we are addicted to them, so be careful out there!

Dan Lucas
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