Understanding Check Fraud and Fake Check Scams (2024)

Money Management

What is check fraud?

Check fraud refers to any deceptive act involving checks to illegally obtain money. This can include altering legitimate checks, forging signatures, creating counterfeit checks, or using stolen checks to make unauthorized transactions.

Types of check fraud

There are several common types of check fraud. Here are some examples:

• Paperhanging:Paperhanging may involve a fraudster writing a bad check and quickly withdrawing funds or making purchases before the check bounces. The goal is to exploit the delay between check writing and processing — often referred to as “the float” — which can allow a fraudster to conduct transactions before a bank detects the fraud.

• Check washing:This is when a scammer steals a check — typically from the mail — and then chemically removes the ink to alter the payee's name, the amount, or other details. They then rewrite the check so they can easily deposit it themselves.

• Check kiting:This fraud occurs when a scammer uses several bank accounts to write bad checks. For example, they may deposit a check into one bank account, even though there are insufficient funds to cover it. Before the check clears, they transfer funds from another account or write a bad check from another account to cover the first check. This creates a temporary illusion of sufficient funds, exploiting the delay in the clearing process.

• Forgery with stolen checks:Criminals may steal blank checks from someone’s home, office, or mailbox. Once they have these checks, they can alter the details and forge a signature.

• Counterfeit checks:These checks are fabricated to resemble legitimate checks issued by banks or businesses. Criminals may use advanced printers and graphic design tools to replicate the look and feel of authentic checks.

• E-check fraud:Fraudsters may utilize digital methods to exploit people and defraud them. E-check fraud may include a variety of methods, such as ACH fraud, account takeovers, or malware attacks, wherein they fraudulently gain access to a person’s account and initiate e-check transactions without consent. Mobile deposit fraud — consisting of depositing the same check into multiple accounts — or using remote deposit capture with stolen or counterfeit checks are other common methods.

What are fake check scams?

Check scams manipulate people into unintentionally participating in transactions based on counterfeit checks. It typically involves a criminal asking someone to deposit a check and then requesting a follow-up action, like transferring the money somewhere else or refunding part of the check funds back to the criminal.²

Types of fake check scams

Common fake check scams may include:

• Overpayment scam:The scammer sends a check to the victim for an amount greater than the agreed-upon price. They then ask the victim to refund the excess amount before the check bounces.

• Work-from-home scam: Scammers pose as employers offering remote jobs. They send a check to cover initial expenses or equipment, instructing the victim to deposit it and wire a portion back before the bank identifies the check as fraudulent.

• Lottery or prize scam:Victims receive a fake check and a notification that they've won a lottery or prize. They're instructed to deposit the check and return a portion to cover taxes or fees. The check eventually bounces.

• Mystery shopper scam:Victims are offered a mystery shopper position, receiving a check to purchase products or services. They're instructed to evaluate the experience and send back the leftover money. The check is counterfeit, and victims lose money.

How to spot a fake check

Wondering how to tell if a check is fake? Here are some ways to potentially differentiate between a real check and a fake check:

• Verify the source and bank:Be cautious if the check comes from an unknown source, and make sure a legitimate bank issued the check.

• Consider the context:Take note if the check is connected to a suspicious transaction or an unexpected offer.

• Be skeptical of overpayments:Be cautious if the check amount greatly exceeds the agreed-upon transaction.

• Beware of urgency:Scammers often create a sense of urgency to pressure individuals into depositing a check before it bounces.

• Inspect the check:Examine the check for signs of poor quality printing, irregularities in color, or visible alterations. Make sure the check includes security features like watermarks, microprinting, or security threads.

Reporting check fraud and scams

Here are a few steps individuals can take to report check fraud, as per the FDIC.²

• If the check was received in the mail, report it to theU.S. Postal Inspection Service.

• Notify the bank listed on the check, as well as any relevant websites or online platforms where the scammer contacted the victim (e.g., online marketplaces, job boards, etc.).

• For individuals who deposited a fraudulent check, file an online complaint with theInternet Crime Complaint Center.

• Contact state and local consumer protection agencies to report fraud.

Learn about other common scams.