Matt Paxton
You open your bank statement to do your monthly account reconciliation, (yes, you do this religiously every month), and you see a check you don’t recognize. It’s not in your check register as a paper check or debit transaction. You don’t recognize the payee. You realize that it’s a very clever forgery – the image of the check has the correct bank routing number and your account number, and even your printed name and address and the bank name - but it’s not your check. And it’s for a significant amount of money.
This happened to us at the paper last month, and in conversations with our bank as to how to possibly get our money back, and more importantly, to prevent this from happening again, I found out that this type of fraud is exploding in the banking world.
How can something like this happen? There are several tactics that criminals use to commit check fraud. Probably the easiest is to steal valid blank checks. Always keep your checkbook with you and in a secure place – if you still carry it with you. For businesses that use single sheet checks, keep the supply of blanks locked up with limited access to the keys.
Another way that crooks use to get your account information is to steal checks out of mailboxes that you have mailed to payees. This is how we believe our account was compromised. Office supply stores sell blank check forms these days, and with the information gained from your check, crooks can create a pretty convincing fraudulent check.
But, how can they get money from that check? It’s unlikely that any bank would cash it unless the presenter had an account with the bank, and no criminal is going to do that. They would be caught as soon as the check was returned.
Here’s one way they do it: they buy an item online from Esty or eBay or other marketplace that individual sellers use. They overpay for the item, using the bad check. When the seller contacts them about the overpayment, they ask the seller just to send them back a check for the difference. The crook, then, is able to cash a valid check from the hapless seller, who is then out not just the cost of item they sold but a lot more money.
We had to close our business checking account and open a new one, with all the hassles of contacting payers who use ACH debits to pay us, and in identifying all the outstanding checks and dealing with that.
This situation has gotten so bad that the U.S. Postal Service issued a warning last month discouraging people from mailing checks! It said that mail theft doubled in 2021 – no clue what the figures are for 2022 but surely worse. You know it’s bad when the Postal Service is actively discouraging mail volume!
The banking industry indicated that there were over 680,000 reports of check fraud last year, up from 300,000 in 2021.
One reason this crime is growing so fast is that few people check their bank accounts regularly, and fewer still reconcile the account when they get their statement. The secret to foiling this kind of fraud is to discover it promptly. A bad check that is weeks old will probably not be returnable to the bank that cashed it. Our banker advised us to check our account online several times a week to detect any unfamiliar transactions, and to regularly reconcile the statement with the account register.
Other countermeasures can include using vendors’ online payment portals or paying with credit cards - and paying the balance in full monthly. Credit card payments are safer than paying with debit cards because of the greater legal recourse available on credit card payments. Unfortunately, no payment method is entirely fraud-proof.
If you still need to make payments with paper checks, it’s safer to take the outgoing envelopes into the post office to put into a secure drop box rather than into an outdoor box. There is really no defense against thieves taking that envelope out of the recipient’s mailbox. That’s why you need to check your account regularly.
Our story has a good ending, at least for us. We were in time to return the bad check to the presenter. We got our money back. Unfortunately, some poor person somewhere is out $4,800. If you sell on Etsy or eBay, that could be you if you take checks for payment. Use a payment service that provides some fraud protection.
It’s depressing that we have to take these precautions today just to conduct business. One has to ask the question: What could these people do if they put as much effort and thought into a legitimate business? I’m sure that has been asked since the beginning of civilization.
