Check washing scams are experiencing a frightening resurgence. Across the country, fraudsters are stealing checks and altering them to steal large sums of money. The number of reported cases in 2022 reached 680,000, nearly double the previous year, according to the Financial Crimes Enforcement Network.
Recent Surge in Check Washing Scams
- U.S. Treasury Department Warning: Despite fewer people using paper checks, the U.S. Treasury Department has issued a warning about a surge in check-washing scams.
- USPIS Recovery: The U.S. Postal Inspection Service (USPIS) recovers over $1 billion in counterfeit checks and money orders each year.
How Check Washing Thieves Operate
Check washing is an old but effective trick. Thieves steal checks, even attacking letter carriers for keys, then use chemicals to alter the checks. Even depositing checks in bank branch boxes carries some amount of risk.
The rise of check washing schemes could also be due to the fact that check washing is a relatively easy process to learn an implement, especially as new technology and online tutorials proliferate.
How Financial Institutions Can Prevent Falling Victim to Check Washing Schemes
Employee Training: Providing regular training sessions to employees to recognize signs of check washing.
- This includes identifying subtle inconsistencies in checks, such as mismatched ink or irregular handwriting.
- FI employees should especially watch for data fields that are misaligned.
- For example, specialized image analysis technologies look for a MICR line that’s out of alignment which often indicates that a cut-and-paste has occurred.
Account Holder Education: Creating awareness among account holders, especially business account holders, about check washing and sharing tips on how to prevent it.
- For example, the USPS recommends only dropping mail in blue boxes during pickup hours.
Positive Pay Services: Pre-authorization and Matching
- Pre-authorization of Checks: With a Positive Pay system, businesses provide a list of checks authorized for payment. Any check presented that doesn’t match the list is flagged, substantially reducing the risk of altered checks being cashed.
- Customized Matching Criteria: Allowing businesses to set specific matching criteria, such as amounts or payee names, for an even more tailored defense against check washing.
Positive Pay by AFS protects business account holders from falling victim to check washing schemes
- Payee Issue File: Businesses can create a payee issue file to cross-verify checks against potential forgeries. Cross-verification of the payee, amount, and date on checks is a vital method to combat check washing. It adds a security layer, making alterations by fraudsters more challenging.
- Automated Verification: Automated processing that matches checks against a pre-determined list, preventing unauthorized transactions.
- Customization: Decision rules can be created and tailored by business clients to enhance the user experience and minimize manual effort.
In an era where the rise of check-washing scams is becoming alarmingly more frequent, financial institutions must be equipped with innovative tools and strategies to combat these crimes. Positive Pay by AFS is a powerful measure that can thwart potential fraudulent activities before they cause harm.
If you are part of a financial institution looking to explore this dynamic solution, we are offering demos and specialized fraud consultations. Don’t allow the growing threat of check washing to undermine your clients’ trust.
Protect Your Business Account Holders: Discover Positive Pay
Financial institutions must stay ahead of rising check fraud. Schedule your free consultation today.
