We live in a digital world where mobile payment and contactless credit cards are the norm. However, traditional paper checks are still in fashion. The Federal Reserve Data revealed that checks still account for almost 6.5% of non-cash payments in the United States.
Relying on paper money paves the perfect path for scammers to try their best to steal, which results in fake check scams. Although the approach to committing this crime varies in a variety of ways, the underlying phenomenon is the same – the scammer wants you to deposit a counterfeit check to your account and later return a percentage of funds to them.
What is Check Fraud?
A definition by the US Legal states check fraud as:
“The unlawful criminal act includes the unlawful use of paper checks to illegally obtain or borrow funds that don’t exist in the person’s account balance or legal ownership.”
In simpler words, the scammer tries to get money from an invalid check while committing check fraud. The check becomes invalid when an otherwise valid check is altered. Moreover, a stolen valid check cashed by a scammer is also considered check fraud.
Types of Check Frauds
Scammers can commit check fraud in multiple ways, these include:
- Forgery – when the scammer signs or alters a check which isn’t theirs.
- Paper hanging – when a scammer voluntarily writes fake checks from their account.
- Chemical alteration – when the scammer uses chemicals to eliminate important details present on the check (like changing the recipient or the amount).
- Counterfeiting – when a scammer illegally prints checks.
Remember, all these checks will be handed to you as a way to scam you. So, identifying which checks can be fake is crucial for your business.
This brings us to the next step – how will you tell if the check you received is fake?
How to Understand if a Check is Fraud?
The printing and scanning industries have advanced, allowing scammers to make fake, counterfeit checks. These fake checks look almost similar to real checks. However, people have still found different ways to discern a fake check from a real one.
Here are a few best ways how to tell if a check is fake:
- Check the Edges
If you want to know how to understand if a check is fraud, feel its edges. At least one side of the check is always perforated or rough. If all four edges of the check are smooth, it wasn’t issued by any financial institution.
- Verifying the Bank Address
If you want to know how to verify a check, find the bank’s website written on the paper. You can even call the customer service number to verify if the address mentioned on the check is correct. In case the address isn’t mentioned or has a P.O. Box, don’t try to cash it.
- Check the Logo
Another sure way of verifying a check to see if it’s fake or real is by looking at the logo embossed on it. The logo will show where the account holder has made their account. If the logo appears faded or has a faint marking, it’s more likely copied from somewhere else.
- Rubbing the MICR Line
Check the quality of the check by rubbing your finger on the line present at the bottom of the paper. The MICR line is printed with special ink to give a smooth look and feel. A shiny or raised numbering shows that the check is fake.
- Look at the Check Number
Every real, valid check has a number present in two places:
- The MICR (magnetic ink character recognition) line is present at the bottom.
- The upper-right corner of the check.
If these two numbers don’t match, the check is fake. According to EPCOR, 90% of fake checks are written off from new accounts. So, check if there are low numbers (like 1000-1500) on a business check or (like 101-400) on a personal check.
- Determine the Paper’s Quality
Legitimate checks use thick, coated paper stock having a matte finish. If the check feels low quality and flimsy when you bend it, or shines, it’s fake. You can even run a slightly wet finger across the inked areas of the check. The ink should not smear if it’s a legitimate check.
How to Verify Funds?
Now that you know how to verify a check, it’s time to understand how you can verify the funds. If you suspect the check to be fake, you can contact the bank and ask them to verify the funds. To protect the privacy of their clients, some banks will only verify if the account is valid.
In contrast, other banks may decide to disclose the information if the account has enough funds to clear the check. However, the scammer may transfer the funds into another account as soon as you verify the account.
If you successfully verify the account and funds are verified in it and you think the check is legitimate, you can deposit it immediately. If you can’t verify the funds, take the check to the bank’s branch from where the funds will be transferred.
You may be able to cash the check instead of depositing it. This will eliminate the chances of the check bouncing. A few banks may charge some fee for this, but not every bank does this.
Who Can Fall Victim to Check Fraud?
There’s only a one-word answer: everyone! People of any age can be a victim of check fraud. However, according to BBB (Better Business Bureau), the common targets of check fraud lie between the ages of 20 to 29.
How to Prevent Check Fraud?
Like the evolving technology, scammers have gotten good at what they do. Here are a few guidelines to prevent falling prey to check fraud:
- Accept paper checks only from people you know well.
- Verify the cashier’s check before cashing it.
- Only give checks to trusted employees, vendors, and contractors.
- Avoid wiring money to businesses or individuals you don’t know or trust.
- Never try cashing a check you weren’t expecting to receive.
- Always carry detailed records of checks you issue to ensure only the correct money amount is taken out from your bank.
- If a buyer wants to pay through check, suggest them to use an alternative method. For example, PayPal.
- If a buyer pressures you to wire back funds, back out of that sale.
- Even if the check has the bank’s number, don’t simply rely on it. To check if the check is legit, take the number from the bank’s official website.
Conclusion
Check fraud is a big problem for businesses and individuals. Anyone can fall victim to this fraud even after being cautious. However, this guide should be a starter in increasing your knowledge of how scammers can scam you and how you can try to prevent this type of fraud to protect you and your business.
