check fraud: what to know and how to protect yourself

Strategies to stay ahead of check scams and protect your finances

Check scams are becoming increasingly common. In 2022, there were more than 680,000 claims of potential check fraud, nearly doubled from the previous year.¹ While it may seem simple enough to send out a check, fraudsters are finding increasingly deceptive ways of taking your hard-earned money. With the rise of technology and online payment systems, there are new ways to send money quickly, securely, and without worry. Learn all about the different types of check fraud and how to prevent it.

4 ways to spot a counterfeit check

A cleared check doesn’t always check out.

Take this scenario: Someone asks you to break a $20 in exchange for a few bucks. You give him or her the change, and then go buy gas with the $20 bill. But the cashier spots the bill as fake, and demands you pay up. Who’s to blame?

Checks can be counterfeit, too, and fake check scams are on the rise. Incidents of check-related fraud escalated 66% in 2021. 

So how do they work? The criminal sends the victim a check to deposit – maybe as a contest winning – and asks for some money back. The victim deposits the check, sees that it has cleared, and sends the money.

Here’s the thing: Just like the alert cashier, the bank will eventually spot the bad check and eliminate the funds – and the victim is left holding an emptier bag.

Check counterfeiters do their homework

Scammers know how to game the system that regulates banks. For example, banks are required to quickly make deposited money available – as soon as the next day if the check is for $225 or less.⁴ Yet it could take weeks for the bank to identify a check is fake, leaving plenty of time for the funds to be withdrawn and let the scammer get away.

In this scenario, the victim is stuck in the middle and could be responsible for reimbursing the bank.

Check fraudsters take many forms, targeting individuals as well as businesses. The check may be disguised as a prize, but the recipient must cover the taxes and fees. Or a check may exceed the price of a product and the “customer” will ask for the difference back. Even perceived job opportunities can be schemes, with a check sent as an advance, but requiring an activation fee.⁵

Use this anti-scam check list

Think you’ve got a hot check? We compiled this checklist from the American Bankers Association and the Federal Deposit Insurance Corp.

✔ Rule out “Prank Bank.” A check from an unknown entity should be treated with skepticism. Verify the source. Ensure the check was issued by a legitimate bank, but note that some counterfeit checks will include a real bank’s name. The FDIC’s BankFind tool lists FDIC-insured institutions.

✔ Address the marks. Scammers may replicate money orders and cashier checks. If the check was mailed, be sure the postmark is of the same city and state as the issuing bank. Also, official checks often carry watermarks, security threads, or other protective features.

✔ Make it official with a ring. If a legitimate bank is listed, call it directly to verify the check. Look up the bank’s number on its website – the number on the check might belong to the fraudster.

✔ Second guess anything that looks “two eazy.” If the sender communicates in writing, look for poor grammar or misspellings.