Based on a 2013 study conducted by the Federal Reserve, checks are the most susceptible monetary instrument to fraud. The reason for this, as the study found, is because nearly 92% of company's use checks to pay off their expenses or major supplies. With fraud being such a rampant threat for businesses and consumer alike, it pays to be informed and to take the necessary precautions.
Do you know what the four types of check fraud are? While most Americans are familiar with the concept of identity theft and check forgery, most are completely unaware of the less obvious ways thieves can steal their personal information.
This is probably the most familiar form of fraud. Criminals can steal a check from a business or individual, endorse it and then head over to bank or payment retailer to withdraw the funds. Payment institutions are supposed to ask for proper identification before doing this but thieves can manufacture phony documents to pass as the person appearing on the check. The best way to prevent this type of check forgery is to keep you checks in a secure location. Storing them in a safe or under lock and key is highly advised, especially in a business setting. You may also benefit from establishing internal controls in regards to employee check allocation and payment.
Like money counterfeiting, check counterfeiting involve the fabrication of a check using a scanner, laser, or computer. More skilled counterfeiters may utilize high-grade software or laser printers to make the check seem authentic. Alteration usually also falls in the category and consists of using chemical solutions (bleach, acetone, etc.) to remove information from the check as is the case with spot alteration (i.e., removing the payee's name). When all the information is erased from the check, it's referred to as check washing. You can limit the potential for counterfeiting by investing in high-quality check stock. These checks have anti-counterfeiting features like watermarks, micro-printing, chemical resistance, and fluorescent fibers.
Check kiting is when an account is opened at an institution using the "float time" of non-existent funds. So in a sense, this is a form of unauthorized credit since the account owner is taking advantage of the floating period.
The legal implications of check fraud are quite severe. Depending on the sum of money involved you could be charged with anything from a misdemeanor to a felony charge. For example, if you forge a check for $150, you'll probably only receive a misdemeanor charge whereas a counterfeit check of $3,000 may land you in the slammer with a felony. Misdemeanor offenses are punishable by a host of fines plus up to a year of jail time. Felony charges have higher criminal fines and usually involved over a year of prison.
A few other ways to prevent check fraud include using online transfer tools to make payments, reviewing your accounts and online reports periodically, storing your canceled checks or financial information in a safe place, and keeping up with the latest techniques thieves employ.