Check fraud is making a comeback. The 2025 Federal Reserve (AFP) survey reveals that 63% of organizations experienced check fraud in 2024, making it the most targeted payment method.
The problem? Banks are often playing catch-up. With high-quality forgeries and limited hold windows, traditional defenses no longer stand a chance.
But this isn’t a lost battle. The institutions that succeed are those that combine more innovative policies, sharper staff awareness, and real-time analytics.
In this guide, you’ll find eight check fraud prevention strategies you can implement right now to protect your institution without slowing down your customers.
Check fraud involves unauthorized use, alteration, or counterfeiting of checks to withdraw funds or misappropriate assets illegally.
It encompasses techniques like forged signatures, altered payee names and amounts, check washing (removing original details to rewrite checks), and counterfeit creation.
Even though digital payments dominate the headlines, checks remain one of the most exploited payment methods.
In 2024, almost two-thirds of organizations reported check fraud, and these incidents accounted for 30 percent of all fraud losses.
Consumers are feeling the impact as well. The FTC reported over 12.5 billion dollars lost to fraud in 2024, up 25 percent from the previous year.
These stats show why check fraud prevention strategies are a top priority in 2025. Without stronger defenses, financial institutions and customers alike remain at risk of mounting losses.
Here are eight proven check fraud prevention strategies that banks can implement right now to stay ahead of evolving threats:
The foundation of check fraud prevention is a clear, enforced policy. Formal policies set the expectations and procedures for handling check deposits, validations, and exceptions. They ensure everyone, from tellers to management, follows consistent controls that minimize opportunities for fraud.
A strong policy also keeps your bank in compliance with regulations like the Expedited Funds Availability Act (Regulation CC), which governs how you can place holds on check deposits. By defining risk-based controls upfront, you create a culture of vigilance and close the gaps criminals might otherwise exploit.
Your employees are the first line of defense against check fraud. Well-trained staff can spot red flags that machines might miss – if they know what to look for.
Ongoing fraud awareness programs empower tellers, customer service reps, and back-office personnel to recognize suspicious checks or customer behavior and respond appropriately. Training also reinforces the importance of following procedures under pressure.
With fraudsters constantly refining their tactics, a one-and-done training from years ago won’t suffice. You need a culture of continuous learning and alertness.
By educating your customers, you reduce the likelihood that they will fall for scams that result in fraudulent checks entering your institution. Moreover, well-informed customers can act as an early warning system by quickly reporting lost/stolen checks or suspicious activity.
Banks that proactively communicate fraud risks not only prevent losses but also build trust with their community (customers feel protected when their bank is watching out for them).
When banks rely on end-of-day batch reviews or manual inspections, fraudsters often slip fraudulent checks through and cash them before anyone notices. That’s why real-time analytics are a cornerstone of modern check fraud defense.
By analyzing each check at the moment of deposit, you can flag suspicious items and take action (hold funds, investigate further) before losses occur. This continuous monitoring across all deposit channels provides a safety net that works 24/7.
How to apply it:
VALID Systems specializes in real-time check fraud screening. For example, VALID’s CheckDetect module screens check deposits across mobile, ATM, and in-branch channels simultaneously. AI flags suspicious items the moment someone deposits them, enabling your team to stop altered or stolen checks before they ever clear.
By integrating such tools, banks have successfully caught over 75% of potential check deposit fraud in advance, drastically reducing surprise losses. It’s like having a digital fraud analyst reviewing every check in the blink of an eye.
A leading U.S. bank was losing millions to check fraud across branches, ATMs, and mobile deposits. Criminals slipped counterfeit and altered checks through gaps in detection, resulting in significant losses and unhappy customers.
CheckDetect scored every deposit in real time. It flagged high-risk items with instant alerts for review, while legitimate checks cleared quickly without unnecessary holds.
Within six months:
Technology can augment your defenses beyond basic monitoring. Two categories of tools are especially powerful for check fraud prevention:
Positive Pay is a service where businesses provide their bank with a list of checks they’ve issued, and the bank confirms any presented checks against that list.
Meanwhile, AI-driven tools can examine check images to detect signs of forgery or tampering that humans might miss, as well as validate elements like signatures and MICR lines automatically.
Use InteliFUNDS© to remove check deposit losses from your balance sheet. The system makes real-time decisions on every deposit, clearing up to 99 percent of items instantly while isolating the 1 percent that need a hold.
Fraudsters often operate across multiple institutions, repeating the same scam or exploiting gaps by moving from bank to bank. This is why a consortium approach, where banks share fraud intelligence, is so crucial.
No single institution can see the whole picture if a criminal deposits a bad check at Bank A on Monday and tries another at Bank B on Tuesday. But by tapping into shared data (industry databases, networks, or direct bank-to-bank communication), you gain a broader view of emerging threats and known bad actors.
In fact, FinCEN has strongly encouraged banks to share information under the safe harbor of Section 314(b) of the USA PATRIOT Act as a way to identify and prevent check fraud schemes.
While prevention is the primary goal, no system is 100% foolproof. It’s equally important to have a robust plan for responding when check fraud incidents do occur.
A swift, effective reaction can significantly limit financial damage and improve the odds of catching the perpetrators.
Moreover, a well-handled fraud incident can turn a negative event into a trust-building opportunity with customers (showing that your bank takes action and helps make them whole).
For years, banks relied on simple “if X then Y” rules to stop fraud. These item-only rules worked when scams were basic and predictable. Today, fraudsters adapt too quickly. The result is either too many false positives that frustrate customers or too many false negatives that let real fraud slip through.
Adaptive machine learning models solve this problem by analyzing multiple signals at once. Instead of looking at a single data point, they combine account behavior, transaction history, and consortium intelligence to spot patterns that rules alone would miss.
For more than two decades, VALID Systems has helped banks and credit unions stop check fraud before it turns into a loss.
We work with major institutions like PNC Bank, TD Bank, and Truist, processing over $4 trillion in annual check volume. That scale gives us unmatched insight into how fraud evolves and how to stop it.
How VALID strengthens prevention strategies:
Ready to strengthen your check fraud prevention strategies?
Schedule a consultation to see how VALID can help your team act faster, investigate smarter, and stop fraud before it becomes a loss.