Did you know 63% of respondents reported experiencing attempted or actual check fraud in 2024?
As digital banking expands, criminals are finding new ways to exploit traditional paper checks through theft, forgery, and mobile deposit scams.
For victims, the aftermath can be confusing and stressful, especially when large sums or sensitive information are involved.
In this guide, we’ll walk you through exactly what to do if you become a check fraud victim, from immediate steps to long-term prevention strategies.
Criminals are now using professional printing tools, chemical “check washing,” and remote deposit scams to steal funds. Businesses are especially at risk because large account balances make fraud harder to detect quickly.
If you suspect check fraud, contact your bank immediately to stop payment or freeze accounts, file a police report, and document every detail. Acting quickly can prevent further losses and strengthen recovery efforts.
Secure your mail, store check stock safely, and use permanent ink to prevent tampering. Encourage staff training and adopt verification tools like Positive Pay to detect mismatched checks early.
Advanced AI systems can detect inconsistencies, forged signatures, and duplicate deposits much faster than manual reviews. Leveraging machine learning reduces false alerts and improves customer experience.
VALID’s AI-driven solutions like CheckDetect and Inclearing identify fraudulent checks in real time, cutting manual reviews by 74% and reducing loss rates by up to 87%. Schedule a demo to see how adaptive fraud prevention can protect your organization and your customers.
Check fraud occurs when someone illegally uses or creates checks to steal money or deceive a victim. It involves gaining unauthorized access to funds through paper or digital checks.
For instance, a scammer might reproduce a company check or create a counterfeit one that appears authentic. Government analysts note that business accounts are especially vulnerable because they tend to be well-funded and may not detect fraudulent activity right away.
Check fraud can take many different forms, and some schemes are becoming more common than others. The chart below highlights trends in specific types of check fraud events, showing which methods are increasing, persistent, or declining in frequency.
Let’s take a look at the most common types of check fraud in more detail:
Criminals use stolen account details and professional printing equipment to create fake checks that look nearly identical to real ones. These counterfeit checks are often drawn on legitimate bank accounts but include forged payee names or altered amounts.
Fraudsters then cash or deposit them before the scam is detected.
Many altered or counterfeit checks slip through during the clearing process, but modern AI tools can catch them before they cause losses.
VALID’s Inclearing uses machine learning to strengthen fraud detection and streamline clearing operations. Here is what it does:
In this scheme, a legitimate check is stolen and tampered with. Fraudsters may use chemicals or software to erase and rewrite key details, a process known as check washing. For example, a check written for $100 could be altered to read $1,000 before being deposited.
Check kiting exploits the time it takes for checks to clear between different banks. A fraudster writes checks from one account and deposits them into another, using the float time to withdraw funds before the checks bounce. This creates the illusion of available money that doesn’t actually exist.
Here, a scammer poses as a customer or vendor and sends a check for an amount exceeding the agreed-upon amount. They then request that the “extra” funds be returned. The check eventually bounces, leaving the victim out of the refunded money.
A related version involves fake invoices. Fraudsters send counterfeit checks for nonexistent services or products, tricking victims into transferring funds before realizing the check is invalid.
With the rise of mobile and online banking, scammers have found new ways to exploit remote deposit technology. They persuade victims to deposit fraudulent checks using a mobile app, then withdraw or transfer the funds immediately.
When the check later bounces, the victim is left responsible for the loss. This tactic is common in online sales and business-to-business transactions where the seller is eager to receive payment.
Discovering check fraud can be alarming, but quick action is crucial. If you suspect a fraudulent check transaction in your accounts, take the following steps:
Acting quickly can make a big difference, as your bank may be able to stop payment, freeze funds, and flag the check before more damage occurs.
Ask your bank for copies or images of the questionable check, and write down any key details. Federal guidance is clear on what to do in this case: “Contact your bank immediately and file a police report”.
Report the fraud to your local police department or regional fraud authority as soon as possible. Be sure to include copies of all fraudulent checks, deposit slips, and any related documents.
If you believe mail theft was involved, also contact the U.S. Postal Inspection Service (USPIS) at 1-877-876-2455, which operates a dedicated tip line for mail-related fraud.
For scams or fraud that occurred online, you can also file a report with the FBI’s Internet Crime Complaint Center (IC3).
Keep a thorough record of all details related to the fraud. Note the dates, check numbers, amounts, and payees involved, as well as any suspicious emails, calls, or messages you received.
Save bank statements from before and after the incident. Comprehensive documentation helps investigators and auditors trace how the fraud occurred and strengthens your case for recovery.
Work closely with your bank to immediately close or freeze any compromised accounts. Once fraudsters gain access, they often attempt multiple withdrawals or check deposits. Ask your bank to review recent transactions for suspicious patterns or connected accounts that might also be at risk.
If you use online or mobile banking, take these steps to protect your information and prevent further fraud:
Knowing what to do if you’re a victim of check fraud is important, but preventing it in the first place is even better. Here are the strategies that can help you significantly reduce your risk of becoming a target:
Mail theft and stolen check stock are common starting points for check-fraud schemes. Protect your business by handling both securely and minimizing paper check exposure.
When writing checks, always use permanent black ink and fill out every field completely. By writing both the numeric and written amounts closely together, you reduce the chance of someone adding extra digits, and you should never leave the payee line blank.
These simple habits make it much harder for anyone to alter or “wash” your checks.
Many banks offer fraud-detection services, such as Positive Pay, to help protect your accounts. With Positive Pay, you share a list of the checks you’ve issued, and your bank automatically flags any that don’t match.
This method is highly effective, with more than 80% of organizations utilizing Positive Pay to prevent check fraud.
Many check-fraud attempts succeed because someone mishandled a request or missed a warning sign. Protect your organization by ensuring that employees and vendors who handle checks, payments, or mail understand the risks and know how to respond to them.
Advanced check design and technology can make it significantly harder for criminals to alter or duplicate checks, and it can help you detect tampering before it results in losses.
Advanced tools like VALID’s CheckDetect use AI-driven analysis to identify counterfeit or altered checks the instant they’re deposited, whether through mobile, ATM, or branch channels. This real-time defense prevents over 75% of potential charge-offs before they occur, helping financial institutions stop fraud before it impacts customers.
New schemes, such as mobile deposit scams and organized mail-theft rings, emerge almost weekly. Keep an eye on updates from regulators and industry groups such as FinCEN and banking associations.
Their alerts can tip you off to fresh tactics before they hit your network, giving you time to tighten controls and train your teams accordingly.
Staying protected means using systems that learn as fast as criminals adapt. VALID’s adaptive machine learning models evolve with new fraud patterns, automatically adjusting to emerging threats and reducing reliance on static rules that quickly become outdated.
As criminals use more sophisticated tools to exploit clearing processes, mobile deposits, and account relationships, financial institutions need defenses that move just as fast. Traditional rule-based systems simply can’t keep pace.
That’s where VALID Systems comes in.
VALID empowers banks and credit unions to detect, predict, and prevent check fraud in real time. Its machine learning platform continuously adapts to emerging fraud patterns, analyzing every transaction through behavioral, payer, and depositor data, catching threats that static systems miss.
The results speak for themselves:
Schedule a demo today and see how top institutions use adaptive AI to detect, prevent, and outpace check fraud in every form.