Common Types of Check Fraud and Scams

One of the largest challenges facing financial institutions is check fraud. It is actually the most common form of financial crime simply because it’s so easy to execute. Despite the advent of electronic payment products, check fraud accounts for billions of dollars in losses each year, making this tactic a prime target for fraudsters. The main types of fraud include forged, altered, and counterfeit checks.

Advanced Fraud Solutions has real-time, private cloud-based fraud detection software that stops fraudulent deposits before they can impact your financial institution

The ease of creating counterfeit items and the financial system’s lack of a comprehensive fraud database to spot the fraudulent items makes it all too easy for criminals to get away with scamming the system. That is why fraud prevention solutions like TrueChecks® are so critical. At Advanced Fraud Solutions, we are committed to continually adding new streams of fraudulent information into our database to combat this growing problem for banks, credit unions, and merchants nationwide.

Fraud Detection in Banking 

Forged checks are where the stolen check does not contain the original signature of the account holder. Counterfeit checks are when the check is not authorized by the legitimate account holder, and altered means that the check may have been genuinely issued by the account holder, but certain details such as the amount are altered.  

The Most Common Check Fraud Scenarios 

There are many variations of scams.  Scammers can use any pitch and still sound believable – they could even offer to pay you to work from the comfort of your home.  This type of scam is intended to draw in unsuspecting people to cash bad checks for them. 

Scammers will also go to the extent of calling or sending emails to random people hoping to catch some unsuspecting consumers in their trap.  Once the target has been secured, the fraudster jumps into action, claiming to be in a far away country and needing someone in the U.S. to transfer the money using a check.  Some will even sweeten the pot and send the victim a check worth more money than is needed and request the extra cash be wired back. U.S. based counterfeiters also try their hand at these scams, using local stay-at-home moms or other individuals looking for part-time work to help in their check cashing schemes. 

The problem is that often the checks look so real that even tellers can fall prey.  With high turnover at the teller line, maintaining tellers long enough to where they are experienced enough to be able to spot a fraudulent item is a struggle. No matter how much training tellers receive, counterfeit checks are often very believable, which makes TrueChecks® all the more important. The ability to scan and run each check against the TrueChecks® database to get the real picture of the account holder’s status and to make sure all information on the check is accurate before it’s cashed, is critical to loss avoidance for financial institutions and merchants.

Here are the common check fraud scams

Excess of Purchase Price: The buyer “by mistake” sends you a check for more than is expected and then asks you to wire back the extra cash. Weeks later, the financial institution discovers the check was fraudulent and you have to pay for the whole amount. 

Sold Goods: A buyer in a different country pays for the goods you are selling and asks you to ship them. The check never clears and you are left to foot the bill.  

Surprise Bonanzas: You may be informed that you won a lottery or a contest affiliated with a legitimate-sounding organization, but you must first pay a fee such as for the transfer tax to be processed. However, this organization is thoughtful enough to enclose a check designed to cover that tax fee. When you deposit that check (you guessed it), it bounces and not only did you not win a lottery, but you now have to pay costly fees.

Simple Check Fraud Prevention Techniques 

Understand that criminals have become extremely skilled. It no longer takes a highly sophisticated criminal to defraud a financial institution.  Advanced technology and institutions’ attention to other areas of fraud have made traditional fraudulent checks more appealing to criminals. A decent printer and a good account number are all it takes for the criminal to win and you to lose.

Advanced Fraud Solutions has real-time, private cloud-based fraud detection software that stops fraudulent deposits before they can impact your financial institution. For over ten years, AFS has continued to build upon and expand the reach of the TrueChecks® database to become the most comprehensive source of bad check data available to financial institutions today. Learn more about TrueChecks® now by requesting a free demo. If check deposits are already covered – explore the options to also prevent fraud across your ACH and card portfolios

— written by Advanced Fraud Solutions