Check Fraud 101:
Simply put, check fraud is an attempt to use paper or digital checks to obtain money.
Counterfeit check fraud is one of the largest areas of fraud for banks and customers. In 2022 Central Bank investigated over $2.8 million in counterfeit check fraud with business accounts being the primary target. Fraudsters know business accounts maintain higher balances than personal accounts and focus their efforts on the bigger prize.
Check fraud involves organized criminal groups and street gangs exploiting our US Postal system to steal mail from secured and unsecured mail boxes. These organized groups will steal mass amounts of mail in search of checks they can alter or duplicate and cash. Once the checks are illegally obtained there are three main schemes utilized to convert the checks into cash:
This group travels multiple states visiting industrial business parks, office parks or areas heavily populated with businesses. They open mailboxes looking for incoming or outgoing checks. Once they locate a check, they mass-produce counterfeit checks, making them payable to individuals they recruit to cash them. Homeless men and women are the primary recruits to cash the checks. The recruiters will visit homeless shelters or other areas frequented by homeless individuals and offer them employment, convincing them that cashing checks is part of their new job. Often the homeless recruits believe they are performing a legitimate service and freely cash the counterfeit checks. The recruit rarely gets any financial reward or compensation for cashing the checks and often gets arrested once the banks realize the checks were counterfeit. The real bad guy is rarely identified and has left the state before the scheme is discovered.
Felony Lane Gang (FLG):
Like Operation Homeless, this criminal activity involves travel to multiple states to steal checks. However, the FLG targets individuals instead of businesses – by visiting gyms, churches, shopping centers, daycare centers and parks where they break into as many vehicles as possible. Their goal is to steal state-issued identification cards and checkbooks. They conduct surveillance and specifically look for female drivers in hopes of locating their purses inside their vehicles. If they steal your ID card from your vehicle and a checkbook from another vehicle, they will make the stolen check out to the name on your ID card and pose as you to cash the check at the bank it’s drawn against. This group travels with female co-conspirators who have various types of clothing, makeup and wigs to match the photograph on your stolen ID card. They got their Felony Lane Gang name because they always use the bank drive-up window located farthest away from the tellers' view. This often makes it harder for tellers to observe if they’re wearing wigs or do not appear the same as the photo ID.
This scheme targets our US Postal system and involves organized criminals intercepting checks from the mail by theft, obtaining US Postal keys or robbery of US Postal personnel. This has become the largest area of loss for banks with mass numbers of checks being stolen. The organized groups will alter or counterfeit the checks obtained from the mail and recruit “check walkers” via social media to cash them.
How to avoid being a victim of check fraud
Check fraud has been around for a long time. And there are some relatively easy and effective ways to avoid it.
Don’t leave anything in your car.
Make sure you never leave your purse, wallet, any ID, your checkbook or even your cellphone in your vehicle.
Check your mail frequently.
Don’t neglect checking your mailbox for days at a time. Make sure to collect your mail frequently so any checks or important information will get in your hands, not the bad guys’.
Reporting check fraud starts with contacting your bank about any stolen checks.
Notes and warnings will be placed on your account alerting our staff that you’ve been victimized.
Convert from checks to more secure payment options. Checks are one of banking’s oldest forms of payment and offer very little protection for customers or banks. Today we have many better options for individuals and businesses to use that include debit and credit cards, ACH, Wires, and other methods available via our CentralNET. Businesses also have the option to obtain Positive Pay1 which offers excellent protection for those that chose to pay by check. Businesses can also obtain Crime & Fidelity Insurance to help cover losses related to check fraud.
Businesses can add Positive Pay service to help reduce check and ACH fraud.1 With Check Positive Pay, you provide the bank with a listing of the checks you have issued. If you write a lot of checks you can upload a file with this data. This data includes issued date, check number, payee and amount. When checks are presented to your account, we will compare them against the checks you have issued. Checks that match the check issued data will be paid. You can simply log into the Positive Pay system and review any exceptions. With ACH Positive Pay, you determine which vendors are allowed to debit your account and for how much. When unauthorized ACH activity occurs, we notify you and you decide if the ACH items should be paid. Contact our Cash Management team to learn more.