Understanding How Check Fraud Works and Common Schemes to Avoid

Understanding How Check Fraud Works and Common Schemes to Avoid

Don’t Bank On a Cleared Check Alone: Understanding Check Fraud

While electronic checks and online payments have become increasingly common, paper checks are still widely used – creating opportunities for fraud. As the FTC warns, ‘Just because a check has cleared your bank doesn’t mean it’s fraud-free.’

This article provides an in-depth analysis of check fraud risks based on FTC data, covering:

•How check fraud works
•Common check fraud scams
Indicators your check may be fraudulent
•Negative impacts of check fraud
•Ways to avoid check fraud
•Steps to take if you’re a victim

With this context, businesses and individuals can protect themselves against potential check fraud when utilizing paper checks for payments.

How Check Fraud Works

Check fraud schemes involve:

1)Cashing or depositing a fake, stolen or altered check.

2)Withdrawing funds before the bank determines the check is invalid and reverses the deposit.

3)Leaving the victim – not the fraudster – responsible for the insufficient funds.

Common Schemes

Check fraud scams include:

•Overpayment schemes – Sending a larger check and requesting the difference be wired back.

Employment scams – Offering a fake job and sending a fraudulent check for supplies.

Online purchase scams – Sending a fake check as payment, then taking the item without paying.

Indicators of Fraud

Watch for:

•Checks from unknown individuals or companies.

•Checks for large amounts, above expected payment amounts.

•Checks for services not actually rendered.

•Checks with errors or alterations.

Misspellings, low-quality paper or printing.

Negative Impacts

Victims face:

•Loss of deposited funds – Banks deduct the invalid amount from accounts.

•Fees and penalties – Banks charge for processing and returning fraudulent checks.

•Damaged banking relationships – Banks may close accounts of repeat fraud victims.

•Stress, wasted time and hassle resolving issues.

Avoiding Check Fraud

To prevent becoming a victim:

•Never cash or deposit a check and wire money back.

•Refuse checks for more than required payments.

•Verify checks with senders before depositing.

•Report any suspected fraud to your bank immediately.

•Consider alternative payment methods for more protection.

Monitor bank statements frequently for unusual activity.

Leave a Reply

Your email address will not be published. Required fields are marked *