How Do Banks Verify Checks? Process & Fraud Prevention

Recent surveys show that 91% of U.S. businesses used paper checks for payments in 2024, up sharply from 75% the year prior.

At the same time, check fraud has skyrocketed.

According to the 2025 AFP Payments Fraud and Control Survey, 63% of organizations reported experiencing check fraud in 2024, making it the most common payment method subjected to fraud.

These circumstances demand that banks treat check verification as a critical frontline defense with stronger, faster, and smarter verification methods.

In this article, we'll explore how banks verify checks, walk through verification steps, and highlight advanced technologies to combat fraud.

Key takeaways:

• The ongoing importance of check verification in 2025: Despite the rise of digital payments, check verification remains vital in protecting banks from fraud. It ensures checks are legitimate, the funds are available, and the transaction is not part of a scam.
• 5-step check verification process: Banks follow a 5-step process to verify checks: inspecting security features, verifying the issuing bank and account, reviewing the payor and check's context, using automated systems, and making a final decision on approval, hold, or rejection.
• Leveraging modern technology for better verification: Banks are using advanced tools like AI, machine learning, and image forensics to improve check verification. These technologies quickly identify fraud, flagging issues in real time and reducing the chances of human error or missed red flags.
• How VALID Systems can help you improve verification: VALID Systems provides banks with powerful tools to enhance their check verification processes, including real-time decision-making and fraud detection.

What is check verification?

Check verification is the process of confirming that a check is legitimate, will clear as expected, and is not fraudulent.

In practice, this means verifying a few key things:

• The check itself is authentic, not counterfeit, altered, or forged.
• The account on which it's drawn is valid and active (i.e., the routing and account numbers correspond to a real account in good standing).
• The funds (or payment obligation) are likely available. For example, that the issuer has sufficient balance or that a cashier's check is genuine.
• Nothing about the transaction raises red flags of a scam or fraud (such as an unusual story or mismatched details).

Verification is proactive: Banks verify checks before fully accepting or clearing them to catch fakes or issues early and avoid losses.

If done correctly, check verification can stop a bad check from ever hitting a customer's account or prevent the bank from releasing funds on it.

What are the differences between check verification and check clearing?

It's helpful to clarify a common misconception: verification is not the same as check clearing. These two terms often get confused:

• Check verification happens upfront, at the point of deposit or acceptance. It is the bank (or recipient) checking the item's validity before the money moves. For instance, a teller examining the check's security features and querying the issuer bank is part of verification.
• Check clearing happens afterward, in the back-end processing. Clearing is the inter-bank settlement process where the paying/issuing bank honors the check and transfers funds between banks. If a check turns out to be fake, altered, or drawn on insufficient funds, it will bounce or be returned during clearing (often a few days later).

In essence, verification checks the check, while clearing moves the money.

How banks verify checks: A 5-Step process

How do banks verify a check in 2025? Here's a breakdown of the typical 5-step verification workflow that many banks use to vet checks before acceptance:

1. Inspect physical security features and basics

The first line of defense is a visual and tactile inspection of the check itself. A trained teller or fraud analyst will examine the physical document for signs of counterfeiting or tampering.

Here are some key things to check:

• Paper quality: Banks print genuine checks, especially cashier's checks or business checks, on high-quality, secure paper. If a check feels like plain thin paper or a cheap photocopy, that's a red flag.
• Watermarks and holograms: Many official checks have watermarks visible when held to light or holographic foil strips. Lack of expected security marks, or the presence of blurry/copied versions, suggests a fake.
• Microprinting: Real checks often have tiny microprinted text (for example, along signature lines or borders) that is hard to reproduce clearly. Smudged or missing microprint is suspect.
• Perforated edges: Personal and business checks are torn from a checkbook, leaving a perforated edge. Counterfeit checks printed on plain stock might have smooth edges all around.
• Printed bank info and MICR line: The bank's logo and address should be professionally printed (not fuzzy). The MICR line (the numbers at the bottom for routing, account, and check number) should be in magnetic ink and have the correct format. Genuine MICR ink has a distinctive feel and won't smear if lightly rubbed with a damp finger.

2. Verify the issuing bank and account

Next, the bank will validate the check's origin. This step involves a few sub-steps:

• Identify the issuing bank: The bank checks the name or logo on the check and verifies the routing number (ABA number) at the bottom against the official registry to ensure it matches the correct bank. If the routing number doesn't match the printed bank name (for example, a check claims to be "First National Bank" but the routing number belongs to another bank), it's a huge red flag.
• Obtain contact details for verification: Rather than trusting any phone number printed on a possibly fake check, the bank staff will lookup the official phone number for the issuing bank, typically using the ABA directory or the bank's official website.
• Contact the issuing bank to verify the check: Using those trusted contact channels, the verifier will call the other bank's customer service or check verification line. They'll provide key details, usually the account number, check number, and amount, and ask the bank to confirm if the check is valid. For cashier's checks or official checks, the verifier might additionally ask, "Did your bank issue a cashier's check numbered X in the amount of $Y to [Payee]?"
• Document the verification: It's standard practice to log the date, time, and result of the call (or note if the bank could not confirm details).

3. Double-check the payor and the check's origin

Beyond the paper itself, banks look at the context: who is giving you this check, and does it make sense?

At this stage, a fraud analyst or teller asks, essentially, "Does everything about this transaction line up with what we'd expect?"

Critical concerns include:

• The customer's account history: Is the person depositing the check a new customer or a longtime client? If it's a brand-new account and they're depositing a large check from an unrelated third party, that's suspicious (fraudsters often open new accounts to deposit bad checks and withdraw cash). If it's an existing customer, do they regularly receive checks of this size or from this issuer? An out-of-the-blue check from an unknown payer might warrant extra scrutiny.
• The source and reason for the check: Ask the customer some polite questions - e.g., "What is the check for?" or "Who gave it to you?". Often, legitimate checks have straightforward answers (invoice payment, payroll, settlement, etc.). But if the customer's explanation is murky or matches common scam scenarios (such as: "I sold something online and the buyer overpaid me and asked for a refund of the difference," or "I won a lottery I never entered and this is the first payment"), alarm bells should ring.
• Payor details: Verify that the name of the person or company on the check (the payor) makes sense for the payee. For instance, if a personal check from "John Smith" is being deposited into a business account with no apparent relation, why is John paying this business? Or if a government check is payable to a customer, does the timing and amount align with known payments (tax refund season, etc.), or could it be counterfeit?

In short, the motto here is "Know your customer, and the check's story."

If anything feels off, the bank should pause and investigate further. Frontline staff are encouraged to trust their instincts: if a depositor seems unsure about why they received a check, or mentions someone instructed them to deposit it and send money back, it's likely a scam.

4. Adopt automated check verification solutions

Advanced check verification platforms now play a major role in fraud screening.

Here's how cutting-edge tools improve the process:

Account and behavioral screening

The system will automatically screen the check against the account's profile and history. For example, it checks whether the paying account (from MICR line) has a history of fraud or frequent bounced checks (some banks tap into consortium databases that track bad-check activity across institutions).

Advanced machine learning models establish a baseline of what regular account activity looks like, and can flag a deposit that is highly unusual for that customer or account type. "Is this check consistent with how this account normally operates?" - answering that question via data is crucial to spot mule accounts or sudden patterns that humans might miss

AI-based image analysis

AI-driven image forensics uses computer vision to analyze check images at the time of deposit.

AI algorithms can spot subtle signs of forgery, like mismatched fonts, spacing issues, or altered parts of the check. They can also compare the check's signature with known reference signatures. Suppose a fraudster edits the check (e.g., using Photoshop). In that case, these tools often catch inconsistencies, like misaligned digits or altered text boxes, making it easier to detect altered checks that might pass a quick visual inspection.

Real-time risk scoring

Each check is given a risk score by the system based on a multitude of factors. Factors may include: the check's amount relative to typical amounts, whether it's the first time this payor and payee are interacting, the deposit channel (mobile vs. teller - mobile might carry more risk), how many other checks have been deposited recently (velocity), and even geolocation data (is the check from a distant region not typical for this customer?).

Example: A $100 payroll check from a local employer that a customer deposits every 2 weeks will score as low risk. But a $9,000 check from an out-of-state account that a new customer deposits via ATM at 11:00 PM might score as high risk due to multiple red flags (new account, odd hour, large amount, unknown payor).

VALID Systems, for instance, uses real-time scoring via InstantFUNDS© engine to automatically decide which deposits need delayed availability or escalation, without waiting for a human decision.

Consortium and cross-bank data

A significant innovation is the use of consortium databases and shared intelligence.

Modern systems can immediately flag a check being deposited at Bank A if Bank B reported it as fraudulent yesterday.

In fact, a new wave of solutions leverages industry-wide data to improve detection rates.

Real-time alerts

If a particularly suspicious check does get deposited, banks deploy real-time alerting so that fraud teams can intervene before funds are withdrawn.

For example, VALID Systems' CheckDetect platform sends instant alerts to the risk team when a deposit matches high-risk patterns.

Rather than finding out days later when a check bounces, the bank's fraud analysts can investigate the same day the deposit happens, potentially freezing funds or rejecting the item if it's confirmed fraudulent. Timing is everything, the sooner you know, the less harm is done.

5. Hold Policy Decision

After gathering all the information, the bank decides on the check with three possible outcomes:

1. Approve the check: If the check passes verification with no issues, the bank processes the deposit and clears the check, following the bank's policies. Funds are made available, often faster, for low-risk checks.
2. Place a Hold on the check: For checks that seem legitimate but require extra protection (e.g., large-dollar amounts, new accounts), the bank can place a temporary hold. Holds typically last a few days, allowing time for verification.
3. Reject the check: If red flags arise, the bank may decline the check, such as in cases of altered checks, fraud indicators, or when the issuing bank cannot verify the check. If the deposit has already been made, the bank reverses it and notifies the customer.

How VALID Systems strengthens check verification

We answered the question, "How do banks verify checks?" and concluded that Check verification remains a necessary, dynamic practice in 2025, requiring both vigilance and innovation.

VALID Systems stands out for its advanced approach to check verification, offering innovative solutions that elevate bank defenses.

Here's why VALID is a top choice for modern check verification:

Real-time AI decision-making

VALID's platform uses real-time, AI-powered decision-making to assess and check risks quickly. InstantFUNDS© system approves low-risk checks instantly, and the CheckDetect module flags high-risk deposits. This speed enables banks to prevent fraud before it happens, ensuring continuous monitoring at all times.

Behavioral analytics and pattern recognition

Unlike traditional systems that rely on static rules, VALID analyzes account behavior over time. CheckDetect tracks activity after deposits, detecting anomalies like sudden check volume spikes or unusual deposit patterns, which could indicate fraud. This behavioral insight, combined with machine learning, creates a complete picture of risk.

Guaranteed fraud coverage

One of the standout features of VALID Systems is its guarantee. If our system approves a check and it later turns out to be fraudulent, VALID covers the loss. This risk-sharing approach aligns VALID's success with that of the bank, ensuring peace of mind and fostering a true partnership.

Leveraging consortium data and AI

By using a consortium model, VALID benefits from the collective knowledge of multiple banks. When one bank encounters a new fraud scheme, all users are informed in near real-time, making the system smarter as it adapts. This "network effect" strengthens the overall defense, turning what was once a private battle into a collective one.

Wondering how leading banks verify checks in 2025?

Let VALID Systems demonstrate how our AI-powered tools can simplify and strengthen your verification process.