While cybercrime makes all the headlines, old school checks have not fallen out of favor with thieves. In fact, according to EZShield, Inc., a patent holder of check fraud protection, checks are still the most targeted payment form in businesses.
“The Council of Better Business Bureaus released a list earlier this year of the most ‘risky’ scams, and fake checks were number two. This includes money orders and cashier’s checks. The ranked list was based on how likely people are to be targets, how likely they are to lose money, and how much money they lost,” says Krystal Rogers-Nelson, a financial and cybersecurity expert with asecurelife.com.
“Fake checks can be so risky because banks are required to make funds from deposited checks available within a couple of days, but discovering a fake check can sometimes take weeks. If you deposit a check and it bounces, even if it seemed to clear initially, you will be responsible for repaying the bank.”
What can go wrong?
Plenty. “While I cannot speak first hand on issues and schemes, what I can tell you is what we hear and see quite often. The two most common complaints from our clients are `check washing’, and theft of pre-printed check stock,” says Erik Harris, eCommerce manager for the Troy Group, a provider of MICR/check printing solutions.
Check washing involves altering a legitimate check, changing the name of the payee and often increasing the amount. “This is the sneakiest form of check fraud. When checks or tax-related documents are stolen, either from the mail or by other means, the ink can be erased using common household chemicals such as nail polish remover. This allows the thieves to endorse checks to themselves. In this case, something as simple and inexpensive as a select uni-ball pen can help. Select uni-ball pens contain specially formulated gel ink (trademarked Uni-Super InkTM) that is absorbed into the paper’s fibers and can never be washed out. The pen costs two bucks and is available at any office supply store,” says Robert Siciliano, CEO of IDTheftSecurity.com.
There are numerous ways to get scammed. “Counterfeiting checks is much easier to do than it used to be. Computer programs are readily available to enable a counterfeiter with the account number and routing number of the bank to create legitimate looking counterfeit checks,” says attorney and author of Identity Theft Alert Steven Weisman.
But just like there are ways to get taken, there are ways to make it more difficult for thieves to get away with the schemes.
“The most advanced technique that banks are using is a system referred to as ‘Positive Pay’. This is a system that authorizes banks to only pay checks that are made to payees on a predetermined list you establish with them. This can be very effective but somewhat limiting if you need to use checks to pay vendors that change frequently,” says Justin Lavelle, chief communications officer for BeenVerified, a provider of online background checks and contact information.
According to the Positive Pay website, positivepay.net:
Positive Pay requires the company to send (transmit) a file of issued checks to the bank each day checks are written. When those issued checks are presented for payment at the bank, they are compared electronically against the list of transmitted checks. The check-issue file sent to the bank contains the check number, account number, issue date, and dollar amount. Sometimes the payee name is included, but is not part of the matching service.
When a check is presented that does not have a "match" in the file, it becomes an "exception item". The bank sends a fax or an image of the exception item to the client. The client reviews the image and instructs the bank to pay or return the check.
There is generally a fee charged by the bank for Positive Pay, although some banks now offer the service for free. The fee might well be considered an "insurance premium" to help avoid check fraud losses and liability.
Weisman offers a few ideas, “It is important not to mail checks from your personal mail box or even U.S. Postal service mail boxes because increasingly, identity thieves and other criminals are stealing mail from these sources and using the stolen information for identity theft and other criminal purposes. You are much safer paying bills electronically. Businesses may also want to use checks with special safety features that make them harder to counterfeit, however, these are somewhat costly for ordinary consumers.”
Furthermore, Lavelle, says to make sure you reconcile your bank statements to look for fraudulent transactions. Have your bank call, or set up text alerts if checks are presented on your account over a certain dollar amount.
Diane Morais, president of consumer and commercial products for Ally Bank, says to “Check your checks. Store blank and canceled checks securely. Report lost or stolen checks immediately. Use your checks in order and look for check numbers out of order on your statements. A check number out of order could indicate fraud.”
Sign up for paperless statements. Switching to paperless statements could help prevent identity theft resulting from stolen mail. Since statements aren’t mailed to your home, mail thieves won’t get access to your checking account number if they intercept your mail.