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Protect Yourself from Check Fraud

By Jon Aldrich

As if we don’t have enough to worry about, paper checks are hot targets for fraudsters

As I was trying to come up with ideas over the weekend for something to write about, I found a good article in the Wall Street Journal about the increasing rates of check fraud. I also had a client recently tell me one of his neighbors was a victim of this type of crime. Since many of my clients and readers of my blog may not subscribe to the Journal, I thought the topic is important enough that I decided I would pen my own article and try to get the word out on steps you can take to protect yourself from becoming a victim of check fraud.

If you are like me, maybe you only write a couple checks a month if you can help it, but I still know many people that do write dozens of checks each month. So, if you only write checks sparingly or ink a large amount of checks each month, let’s delve into how check fraud is occurring and some simple steps you can do to protect your bank account from the bad guys.

According to the Wall Street Journal (5/9/2023) in 2022 banks filed 680,000 check-fraud reports, which was almost double the 350,000 check fraud reports filed in 2021. In addition, the US Postal Service received about 300,000 complaints regarding mail theft from March 2020 to February 2021 which was more than double the amount from the year earlier. This type of crime is definitely on the rise.

So, how are the crooks pulling this all off? One of the popular ways thieves are accomplishing this is by raiding mailboxes to steal envelopes containing checks and using chemicals to lift the ink from the check and new recipients and amounts can be written in place of the original ones. This is known as “check washing”. When you think about it, checks really don’t have a lot of security features and thus are easy to counterfeit or change.

There are many stories of checks that were originally written for amounts such as $50, being “washed” and changed to something like $500 or even $5,000.

There have also been reports of organized gangs of criminals robbing US Postal Service workers and stealing their keys to the famous “blue” mailboxes you see at the Post Office or certain street corners.

Many victims have claimed they have waited months for their cases to be resolved and made whole by their banks for the funds that were stolen. This type of crime is not covered by the Federal Deposit Insurance Corp (FDIC), the organization that protects cash deposits under $250,000 at the bank. The FDIC usually only steps in for bank failures such as the recent bank failures at Silicon Valley Bank.  

If you wait too long to file a claim with the bank (usually need to file within 30 to 60 days of the crime), they can deny your claim. They can also deny the claim if they suspect you were negligent or involved in the scheme some way. Therefore, you really want to take steps to try to limit your exposure to this type of crime.

Steps to Protect Yourself from Check Fraud

Set up Bills to be paid Electronically – I know many people who don’t trust this method either, but in reality, it is more secure than sending checks in the mail these days. Plus, you can save on the cost of postage. For many transactions, digital payments offer better consumer protections.

Don’t Put Checks in Your Mailbox – Since thieves are raiding mailboxes, don’t give them anything good to steal. If you must mail checks, send them directly from inside the Post Office and not the blue mailbox that sits outside.

Use a Gel-Ink Pen for Writing Checks – A pen that uses gel ink seeps into the paper better making it much harder for the bad guys to wash and alter checks. A couple good choices are the Pentel Retractable Gel Ink Pen and the Uni-ball 207. These pens are easily available at places like Office Depot or Amazon. The ink on the Uni-ball 207 does not dissolve in chemicals.

Don’t Leave Too much in your Checking Account – Of course you need to leave enough in there to cover your monthly bills and living expenses, but maybe you don’t need to keep a whole lot more than that. Keep the excess in a savings account, either at the same bank, or one of the online banks such as Ally, and transfer funds as needed.

Guard Your Checkbook Closely – You are probably already doing this, but just a reminder to not leave it laying about and protect it like you would cash.

Use Windowless Envelopes – When sending checks, use a windowless envelope and wrap the check with a blank piece of paper so crooks will not easily know there is a check enclosed.

Go Online Frequently to Check Your Account – Check your bank account every couple of days to review activity in your bank account. I use the bank app on my iPhone and can easily check my accounts in a matter of a couple of seconds. The sooner you recognize you have been the victim of fraud, the easier it is to recover.

Use PayPal, Venmo or Zelle – When sending money to friends and family utilize online payment processors such as these. I utilize all 3 and it comes in especially handy in paying off golf debts, or sometimes collecting winnings! The money gets to the recipient instantly. Although you have to be a bit careful here as new IRS tax laws will require those who get more than $600 from someone to get a 1099 that is reported to the IRS. However, for the occasional payments to people below this amount, it works really well. What is ironic about the new IRS tax law is that more people and small businesses will require payment via checks to avoid the 1099, so it is likely check fraud is going to continue to increase since there will likely be more checks available.

Just like the old fashion trends seem to come back in vogue, who would have thought that in today’s digital age that an old-fashioned type of crime is coming back into popularity with crooks. But like so many other things in today’s world, you must take steps to protect yourself and your money, or they could soon be parted.

For those of you who have shunned electronic transactions, you need start being wary of writing checks and make sure you take precautions so you do not fall victim to check fraud.