Statistics show that, among all forms of payment options, checks remain more susceptible to fraud than even credit and
debit cards. More than 500 million fraudulent checks are being processed each year, creating losses in the billions of
The most common type of check fraud is forgery. Corporations and individuals alike are vulnerable to forgery. Individuals will acquire a personal check or one drawn on a business account, fill out the check and forge the signature of the owner of the checking account.
Counterfeiting is a relatively new area of check fraud in which criminals use color copiers or advanced computer software programs, scanners and laser printers to duplicate checks.
Alteration occurs when individuals use chemicals to erase either part or all of the existing printed and written information from a check, and then replace it with counterfeit information. When an individual knowingly writes a check drawn on a closed account, it is called paperhanging.
Recently, new laws speeding up the process of making funds available after being deposited have facilitated a new form of
fraud called check kiting. In this situation, an individual opens accounts with multiple banks, using the available balances at each bank to create the illusion of positive balances.
Businesses have Check Fraud Protection technologies in place that are designed to detect fraudulent checks, such as high
speed image analysis, data analysis and duplicate detection prior to posting. They also incorporate check stock validation into assessing abnormal checking account activity. Endorsement confirmations use detection technologies for automated signature verification, and various payee recognition technologies are used for verification and data mining purposes.
The current security measures currently being used help to reduce the number of check fraud cases, but some are still able to slip through the cracks due to a delay in the time it takes a check to be processed. While technology is advancing in the field of fraud protection, criminals are also able to use technology to their own advantage, finding new and innovative ways to commit fraud. Financial institutions are working with security and technology specialists to develop ways of preventing fraud at the moment a stolen check is presented.