Check Fraud / Counterfeit Checks
Check fraud is a significant challenge facing businesses and financial institutions today. Affordable software and hardware and other advancements in computer technology are making it easier to duplicate checks or fabricate new ones. A significant amount of check fraud is due to counterfeiting through desktop publishing software, color copiers, and high-quality printers. In addition, chemical alteration allows the counterfeiter to remove some or all of the information on the check and manipulate the check to his or her benefit.
Some signs that may indicate a fraudulent or counterfeit check include, but are not limited to:
- A check printed on poor quality paper and/or paper that feels slippery;
- Check colors that smear when rubbed with a moist finger, which may suggest that the check was manufactured on a color printer or copier;
- A personal check that does not have a perforated edge;
- A check that shows indications of having information that has been altered, eradicated, or erased;
- A check drawn on a new account that has no (or a low) sequence number and/or a high dollar amount;
- A check on which the name and address of the drawee’s financial institution is typed, rather than printed, or that includes spelling errors;
- The customer’s name and/or address is missing;
- Numerical and written amounts do not match;
- The MICR numbers are missing (NOTE: MICR stands for Magnetic Ink Character Recognition and refers to the numbers at the bottom left-hand corner of a check, printed in magnetic ink that can be read by machines. The numbers are usually encoded with the routing number of the financial institution, the account number, and the check number. The dollar amount is added to the MICR line during check processing. The nine-digit number between the colon brackets on the bottom of a check is the routing number of the bank on which the check is drawn. The first two digits indicate in which of the twelve Federal Reserve Districts the banks are located. It is important that these digits be compared to the location of the bank because a forger will sometimes change the routing number on the check to an incorrect Federal Reserve Bank to buy more time;
- The MICR encoding at the bottom of the check does not match the check number;
- The MICR encoding does not match the bank district and the routing symbol in the upper right-hand corner of the check;
- The word “VOID” or “non-negotiable” appears across the check;
- The check lacks an authorized signature;
- The check has a signature that is irregular-looking or shows gaps in odd spots;
- Corporate or government checks that show numbers that do not match in print style or otherwise suggest that the amount may have been increased; and/or
- Checks presented at busy times by belligerent or distracting customers who try to bypass procedures.
If your business accepts checks, here are some steps to take to reduce the risk of accepting counterfeit checks:
- Authenticate the check – (1) call the issuing bank to verify the account; and (2) call the issuer to verify that the check is real (using phone numbers from an independent source, not just what is printed on the check).
- If you are cashing a United States Postal Service (“USPS”) Money Order, go to about.usps.com/notices/not299/not299_002.htm to see the security features of an authentic USPS Money Order and to learn how to report an issue.
- Train your tellers/cashiers/customer service representatives to identify potential fraudulent checks and the proper procedure if a fraudulent check is identified.
- Consider investing in UV counterfeit detection scanners. These devices read hidden UV security features built into currency, checks, travelers checks, money orders, credit cards, drivers licenses, passports, and government checks.
- Consider any available fraud software or databases that may help to deter loss.