A single instance of check fraud can result in significant financial losses, operational disruptions, and damage to customer trust.
While many assume paper checks are on their way out, fraudsters see them as easy targets.
With check fraud on the rise, institutions without reliable defenses risk falling victim to swift, large-scale fraud attempts that easily slip past outdated systems.
The good news is that financial organizations can protect their assets and preserve customer trust with the right tools and proactive measures.
In this guide, we will examine the factors driving the rise in check fraud, identify the most at-risk institutions, and outline the fundamental strategies needed to prevent fraud before it happens.
Why is check fraud on the rise?
Check fraud is on the rise due to outdated security measures, increased mail theft, and sophisticated counterfeiting techniques. Fraudsters exploit gaps in traditional check processing systems, using tactics like check washing and mobile deposit fraud to bypass detection.
These vulnerabilities, combined with the limited adoption of advanced fraud prevention technologies, have made checks an attractive target for criminals.
Let's dive into more details of why check fraud is on the rise:
Checks aren't dead - they're just changing
The use of checks may be shrinking, but they're far from gone. While fewer checks are being written, the ones that remain tend to carry more weight. For fraudsters, that shift means fewer opportunities, but each one is potentially more lucrative.
Legacy systems and manual verification
Many banks still rely on older technologies, like signature verification, that are easy to forge or bypass. Manual review processes can't keep up with the speed and scale of modern fraud attempts.
The digital paradox
According to the American Bankers Association, 55% of U.S. consumers primarily use mobile banking, making it the most prevalent banking method.
Ironically, the tools meant to simplify banking, like mobile deposits and online account opening, have also introduced new weaknesses. Fraudsters quickly take advantage of gaps in digital onboarding and remote deposit systems.
Mail system weaknesses
In the first half of 2024, financial institutions reported over $688 million in suspicious activity linked to mail theft-related check fraud.
Once a trusted conduit, the postal system is now a prime hunting ground for thieves. The surge in mail theft has made physical checks more vulnerable than ever.
Synthetic identity fraud
Criminals are increasingly using synthetic identities, blending real and fake information to create convincing personas.
In the first half of 2024, the percentage of newly opened accounts connected to synthetic identities increased by 18% yearly, with bank card issuers experiencing the highest percentage, at 33%.
Recent check fraud cases in the news
Here are some recent examples from the news of how check fraud schemes are being executed and how fraudsters are exploiting vulnerabilities in today's systems:
- $53 Million Check Fraud Scheme Uncovered in New York: In April 2025, authorities charged four people in New York for stealing checks from mail, forging them, and using fake identities to defraud banks of $53 million. The case exposed serious flaws in check security.
- Louisiana Woman Sentenced for USAA Bank Fraud Conspiracy: In May 2025, authorities sentenced Destane Glass to over 11 years for running a $2.1 million check fraud scheme. She stole USAA customer data, created fake checks, and withdrew funds through banks and casinos.
- Check Fraud Scheme in Illinois Involves Counterfeit Checks: In May 2025, a man from Wood River, Illinois, faced charges for using counterfeit checks to steal over $18,000 from UMB Bank. He worked with an accomplice to deposit and withdraw funds using fraudulent checks.
The trend is clear: check fraud is not just persisting - it's accelerating, evolving, and becoming more advanced, but smart defenses can outpace it.
Types of check fraud
Here's a breakdown of some of the most common check fraud tactics used today:
1. Mail theft
Mail theft involves stealing checks from residential mailboxes, business drop boxes, or postal carriers.
When to look out for it?
Fraudsters target tax season and billing cycles, stealing checks when people mail them more frequently.
Key indicators:
- Missing or delayed mail.
- Checks were cashed before you mailed them.
- Reports of thefts in your area.
2. Phishing
"Phishing" in check fraud occurs when fraudsters trick victims into revealing their personal or banking information, which they then use to create fake checks or mule accounts.
When to look out for it?
Fraudsters often send fake emails pretending to be banks or other trusted organizations to steal sensitive data.
Key indicators:
- Suspicious emails requesting account verification or login details.
- Unexpected communications asking for sensitive information.
3. Check washing
Check washing is the process of using chemicals to remove ink from a real check so the fraudster can rewrite it with new details.
When to look out for it?
This usually happens after mail theft or when checks are left unsecured.
Key indicators:
- Faded handwriting or uneven ink.
- Check amounts or payees that don't match your records.
- Signs of chemical alteration.
4. Counterfeit checks
Fraudsters create fake checks that closely mimic real ones using stolen account information and printing software.
When to look out for it?
These often appear in scam transactions like fake job offers or prize claims.
Key indicators:
- Poor-quality printing or misaligned elements.
- Lack of standard security features.
- Unexpected checks from unknown sources.
5. Forged endorsements
This fraud occurs when a criminal signs the back of a stolen check made out to someone else and attempts to cash it.
When to look out for it?
It typically follows mail theft or stolen personal checks.
Key indicators:
- Endorsements that don't match the payee.
- Checks are cashed without your knowledge.
6. Altered checks
Fraudsters manually change details like the dollar amount or payee name on a legitimate check.
For more information about altered checks, check out this article.
When to look out for it?
Alteration can happen after checks are intercepted or improperly stored.
Key indicators:
- Inconsistent handwriting.
- Mismatched fonts or ink colors.
- Payee names that don't match your intent.
7. Mule accounts
Mule accounts are fake or compromised bank accounts that deposit and move stolen funds.
When to look out for it?
Fraudsters often create these accounts using stolen or synthetic identities.
Key indicators:
- New accounts with no financial history.
- Multiple deposits followed by rapid withdrawals.
- Suspicious activity patterns.
8. Fake identity fraud
In this scheme, fraudsters blend real and fake information to create a new identity and open fraudulent bank accounts.
When to look out for it?
Fake identities often slip through standard fraud detection systems.
Key indicators:
- Discrepancies in personal data (e.g., mismatched SSNs and names).
- Newly opened accounts with immediate high-value activity.
How to protect your bank from check fraud in 2025
As check fraud becomes more advanced, both financial institutions and consumers must adapt to stay ahead of fraudsters.
Here's how VALID Systems helps you protect yourself with real-time, intelligent solutions designed to detect and prevent fraud with precision and efficiency:
1. Implement AI-driven real-time transaction monitoring
The first line of defense against check fraud is continuous monitoring powered by artificial intelligence (AI).
AI systems analyze transaction data in real time, identifying suspicious activity before it causes any harm.
How it works:
AI-powered platforms constantly track, check processing, and account activity. They flag anomalies such as unusual check amounts, payees, or locations in real time.
Pro tip: VALID Systems' Real-Time Loss Alerts (RTLA)
VALID Systems' Real-Time Loss Alerts (RTLA) use AI to detect potential fraud before checks are clear. With sub-second decision-making, these systems immediately identify suspicious checks, enabling financial institutions to take prompt action.
2. Leverage behavioral pattern analysis for check authentication
Modern AI tools can create detailed behavioral profiles of account holders, tracking typical check-writing patterns.
The system immediately triggers an alert when deviations occur, such as checks being issued to new payees or from unusual locations.
How it works:
AI analyzes how users issue and process checks, monitoring factors like check frequency, amounts, and payee details. If an account deviates from its usual behavior, like issuing checks to a new payee in a different location, it triggers a flag for review.
Pro tip: VALID Systems' INclearing Loss Alerts
VALID Systems' INclearing Loss Alerts utilize behavioral analytics to identify real-time discrepancies during clearing. By detecting unusual patterns early, these tools help flag fraudulent checks before they can cause significant damage.
3. Use positive pay and automated exception handling
Financial institutions are increasingly implementing Positive Pay solutions to reduce the risk of fraudulent checks. These systems automatically verify check details (such as payee, amount, and check number) against the bank's records before processing.
How it works:
AI-enhanced systems assess the risk of exceptions flagged by Positive Pay, automatically determining whether a check is legitimate or potentially fraudulent.
Pro tip: VALID Systems' InteliFUNDS
VALID Systems' InteliFUNDS optimizes Positive Pay systems using machine learning to assess and handle exceptions. Learning from past exceptions reduces manual review efforts and improves fraud detection accuracy.
4. Apply risk scoring and check verification
AI technology enables quick risk assessment for each check. Every check is assigned a risk score based on factors like payee details, check amount, and account history, ensuring only legitimate checks are approved.
How it works:
AI continuously analyzes various risk factors for each check, generating an immediate risk score to determine whether the check should be approved, held, or rejected.
Pro tip: VALID Systems' Real-Time Loss Alerts (RTLA)
VALID Systems’ Real-Time Loss Alerts (RTLA) instantly detect fraud at the point of presentment, flagging high-risk checks across mobile, ATM, and branch channels to help prevent losses before funds are released.
5. Invest in continuous education and fraud trend analytics
Prevention isn't just about technology. It's also about being aware of new threats. Regular education and awareness campaigns ensure that customers and staff know how to recognize and report suspicious activities.
How it works:
AI systems track fraud trends and evolving patterns, providing insights into emerging risks. This data drives the creation of training materials and customer education programs.
Pro tip: VALID Systems' Fraud Trend Analytics
VALID Systems' Fraud Trend Analytics continuously analyzes transaction data to identify new fraud tactics. These insights are shared with financial institutions, enabling them to update their training and provide proactive customer education.
By informing customers about the latest fraud schemes, institutions empower them to take the necessary precautions and reduce their risk of becoming victims.
Why Valid is a great choice for preventing check fraud in 2025
VALID Systems is an industry leader in AI-driven risk management and fraud prevention, offering cutting-edge solutions to keep businesses ahead of evolving fraud threats.
With over 20 years of expertise, VALID Systems has become the trusted partner of top financial institutions like PNC, TD Bank, and Truist, helping them stay competitive while safeguarding their operations from check fraud.
Here's why VALID stands out:
- Instant Fraud Detection: Our platform analyzes transactions in real time, spotting fraudulent activity as it happens and ensuring prompt action without manual delays.
- Proactive Analytics: We leverage advanced machine learning to continuously learn from patterns, enabling us to identify high-risk checks before they cause harm.
- Seamless Integration: VALID's solutions integrate effortlessly with your existing systems, enhancing your fraud prevention strategy without disrupting your daily operations.
- End-to-End Protection: From deposit through settlement, we provide comprehensive coverage, so your organization remains protected from emerging fraud tactics.
Take your check fraud prevention to the next level!
Book a free consultation with VALID Systems today and discover how our cutting-edge solutions can help you protect your financial institution from check fraud.