Check Fraud: A Guide to Avoiding Losses

Check fraud schemes can take many forms. Checks may be:

• Altered as to the payee or by the amount;
• Counterfeited;
• Forged by signature or endorsement;
• Drawn on closed accounts.

Check fraud criminals may be financial institution insiders, independent operators, or organized gangs. The methods they use to check fraud include:

• Getting customer information from financial institution insiders;
• Stealing financial institution statements and checks;
• Working with dishonest employees of merchants who accept payments by check;
• Rifling through trash for information about financial institution relationships.

Preventive measures presented include:

• Internal controls to prevent check fraud by insiders;
• Education and training of tellers;
• New accounts training;
• Positive pay;
• Electronic check presentation.

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