Despite the overall adoption of digital payments, paper checks remain a significant target for fraudsters.
Financial institutions are facing increasingly challenging times, with 63% reporting check fraud incidents in 2024. Despite these risks, 91% continue to use checks, and over 75% have no immediate plans to discontinue their use. This ongoing issue highlights the importance of staying vigilant and strengthening fraud prevention efforts.
Counterfeit checks are among the leading contributors to check fraud within financial institutions.
This article will guide you on how to spot counterfeit checks and, most importantly, how to prevent them from impacting your finances.
A counterfeit check is a fake version of a legitimate check, made to closely resemble the original in every detail, including the bank logo and security features.
Fraudsters use these checks to deceive recipients and banks into believing they are genuine, thereby allowing them to steal money before the fraud is detected.
Spotting counterfeit checks is key to preventing financial loss, especially as check fraud becomes an increasingly common threat.
In 2024, banks reported over 718,000 suspicious check fraud cases, almost double the number from just three years ago.
Most scams follow a familiar pattern that exploits human nature and trust in institutions.
Here's a typical scenario:
This scam can occur in various settings, including Craigslist rentals, job boards, romance scams, and Facebook Marketplace. The story might change, but the method remains the same.
Here are some recent cases that highlight the growing sophistication of counterfeit check scams:
These cases reveal the diverse methods of counterfeit check fraud, from insider collusion to large-scale mail theft and online scams targeting individuals.
Counterfeit checks can look remarkably real, but there are often subtle signs that can reveal their fraudulent nature.
Here's how to spot them and protect yourself from scams:
Counterfeit checks often use low-quality paper and poor printing. If the check feels thin, lacks texture, or has blurry logos and borders, it's likely fake.
Run your fingers over the paper. Genuine checks should feel sturdy, with high-quality printing that is sharp and clear.
Legitimate checks include watermarks, microprinting, and security threads, which help prevent fraud and identity theft. Counterfeits often lack these features or have poorly replicated versions of them.
Hold the check up to the light to look for a watermark. Use a magnifying glass to check for microprint or holograms that shift when tilted.
Check the bank's name, address, and routing number. Counterfeit checks often feature slight mismatches in these details.
Verify the routing number and bank details online to confirm they match the actual bank information.
In a legitimate check, the check number should match the MICR (Magnetic Ink Character Recognition) number at the bottom of the check.
Compare the check number at the top with the MICR line. If the numbers don't match, it's likely a counterfeit.
Look for signs of tampering, like erasures, discoloration, or changes in ink color.
Hold the check up to the light. If you see faint marks, ghost writing, or ink inconsistencies, it's a red flag.
If you received a check unexpectedly, especially for an amount larger than anticipated, it's likely a scam.
Be cautious if someone pressures you to deposit a check quickly or asks you to send money back before it clears.
Counterfeit checks often have poorly printed logos, making them appear blurry or pixelated.
Look closely at logos and images. If they appear distorted or uneven, the check may be fake.
If the written amount doesn't match the numerical amount or if there's an obvious alteration, it has likely been tampered with.
Compare the written amount (in words) with the numeric amount. If they don't match or the check seems altered, investigate further.
A counterfeit check may have odd spacing between fields or misaligned text.
Examine the check's layout. If the text appears cramped or oddly spaced, it could be a counterfeit.
If there's no phone number for the issuing bank or the number provided is incorrect, the check may be counterfeit.
Look for a phone number on the check. Call the official bank number listed on their website, not the number printed on the check.
Scammers often create a sense of urgency by pressuring victims to deposit checks and send money quickly.
If the situation feels rushed or unusual, like receiving a check for something you didn't expect, proceed with caution.
Here are 8 proven strategies to help your bank prevent counterfeit check fraud and safeguard your financial assets:
Real-time risk scoring allows for instant evaluation of checks during deposit.
Banks assign a risk score to each check using machine learning and rule-based systems and take action if they flag it as suspicious.
How to implement real-time scoring:
To gain real-time, accurate insights on every check deposit, try CheckDetect. This powerful solution detects over 95% of potential check charge-offs with high precision, enabling you to take prompt action immediately after the deposit.
Positive Pay is an essential service that enables businesses to prevent counterfeit checks.
It involves sending a list of issued checks to your bank, so only those checks that match the list are honored.
Steps to take:
Behavioral analysis allows banks and businesses to identify fraudulent checks by analyzing patterns of account activity.
Using historical data, banks can determine what "normal" behavior looks like and flag any deviations as suspicious.
Steps to use behavioral analysis:
Investing in high-security check paper is one of the best ways to prevent counterfeiting.
High-security checks feature elements such as watermarks, microprinting, and chemical-sensitive ink, making it difficult for fraudsters to replicate or alter the checks.
Best practices:
Fraudsters often attempt to deposit counterfeit checks through multiple channels, such as in-branch, via ATM, or through mobile banking apps.
By integrating fraud data across these different channels, banks and businesses can catch fraudsters before they succeed.
Best practices for cross-channel intelligence:
Regularly reconciling business bank accounts allows you to spot fraudulent transactions before they go unnoticed.
By reviewing your transactions daily or weekly, you can quickly identify discrepancies and report them within the bank's fraud protection window.
How to ensure practical reconciliation:
Limiting the number of checks your business issues can significantly reduce the risk of fraud.
Whenever possible, encourage customers and vendors to use more secure payment methods, such as ACH transfers or credit card payments, to improve security.
How to reduce check exposure:
Proper employee training is essential for detecting counterfeit checks and avoiding fraud.
Accounts payable staff, as well as anyone who handles checks, should be trained to recognize the warning signs of counterfeit checks.
Employee training tips:
VALID Systems is a leader in AI-powered fraud prevention, providing innovative solutions designed to tackle evolving threats, such as counterfeit check fraud.
Leading banks such as PNC, TD Bank, and Truist trust VALID Systems to safeguard their operations from fraud.
With decades of experience, VALID Systems combines deep industry expertise with cutting-edge AI technology, making sure your institution stays ahead of increasingly sophisticated fraud tactics.
Our seamless integration and real-time insights allow your organization to respond quickly, reduce risks, and maintain customer trust in an ever-changing landscape.
Essential VALID Solutions to fight counterfeit check fraud:
CheckDetect - Stop fraud before it happens:
This feature identifies up to 75% of potential check deposit charge-offs at the point of presentment, helping your bank prevent counterfeit checks from being processed and minimizing financial losses.
INclearing Loss Alerts - Catch what others miss:
INclearing Loss Alerts uses machine learning to detect fraud patterns that other systems might overlook, giving you an extra layer of protection against sophisticated fraud attempts.
Edge Check Data Consortium - Predictive fraud detection at scale:
With access to data from over 420 million accounts and $6 trillion in processed checks annually, VALID Edge provides predictive insights that help spot emerging fraud trends before they become a problem.
Ready to stay ahead of counterfeit check fraud?
Book a free consultation with VALID Systems today to discover how our AI-driven solutions can help your bank identify and stop counterfeit checks before they cause harm.