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Check Fraud-Old Scam, Still Very 'Today', and Very Expensive

Posted by John Rowan Posted on Oct 18 2010

According to the Association of Certified Fraud Examiners (ACFE) 2010 Global Fraud Study, check tampering, which they defined as "Any scheme in which a person steals his employer's funds by intercepting, forging, or altering a check drawn on one of the organization's bank accounts" amounts to 13.4% of all asset misappropriations with a median loss of $131,000, which is the largest dollar value of all categories. There are many different ways to tamper with a check but the four most common are:

1.     Forgery: These checks are usually written for fairly small amounts so the cashier doesn't ask too many questions.  These checks have been stolen or duplicated from a generally well known company and are typically presented as payroll checks using fake identification.  While non-business forgeries don't usually total as much, the consequences of the theft are sometimes much more devastating to the account holder.  In many of these cases forgeries are by trusted caregivers or family members taking the checks from the victim's home.

2.    Counterfeiting: Counterfeit checks are generally made with a computer and commonly available software.

3.     Alteration: Crooks will use ink remover on an intercepted legitimate check to insert a new payee and larger amount. There are some laser inks that can be frozen and simply scraped off.  Of course the legitimate signature is always preserved using any method.

4.     Dead checks: This scam involves writing checks drawn on closed accounts. This crook will usually purchase something, possibly asking for some cash back, and then return the item for cash to the unwary merchant before the check bounces.

Three things to look for:

1.     The printing on the check is not uniform, maybe a slightly different color or paper feel, or the text font is different or out of line.

2.     The check contains misspellings or other obvious mistakes that a local company is not likely to make, for example the wrong zip code for the city.

3.     The coding at the bottom of the check should have a 9 digit routing number on the left, then the account number, and finally the check number in the bottom right corner.

Nine things the ACFE has compiled to help prevent check fraud:  

1.      Minimize employee access to checks.

2.    Reconcile statements when they arrive.

3.      Be aware of magnetic routing numbers.

4.      Look for checks with a check number less than 200.

5.      Notice the date that the account was opened.

6.      Look for perforated edges on the checks.

7.      Know the components of acceptable identification.

8.      Recognize forged/altered identification.

9.      Notice people who are overly polite, nervous, or aggressive and hurried.