Check fraud is a serious issue that can have significant financial and reputational consequences. The Uniform Commercial Code (UCC) regulations stipulate that bank customers share some responsibility for forgery losses, not just the banks. This means that you could be held accountable for losses incurred due to check fraud. In addition to potential financial losses, dealing with check fraud can be time-consuming and damaging to your credibility. The best defense against check fraud is to exercise due diligence, which includes implementing careful practices regarding your checks and using checks with robust security features.
Banks often downplay the extent of check fraud, but estimates suggest that it costs hundreds of millions to 10 billion dollars annually. In 1991 alone, the FBI tracked over 26,000 cases, but this only represents a fraction of the total incidents, as the FBI primarily focuses on cases where the amount exceeds $100,000. For instance, The Green Sheet, a publication for the Financial Services Industry, reported a case where a family allegedly stole more than $1 million from area merchants since 1993 by writing checks on closed and non-existent accounts at 11 financial institutions in Indiana and Chicago under 25 different names. In just four years, Northern Trust Bank detected more than 3 million dollars worth of counterfeit checks.
Fraudsters often target high volume bank accounts where a fraudulent check can easily slip through. They look for checks that are easy to reproduce using a color copier and easy to tamper with. They also seek easy access to checkbooks or check stock.
While it's impossible to completely prevent fraud, you can significantly minimize the risk by implementing good procedures related to your check processing and using checks that are difficult to counterfeit or alter. Here are some steps you can take:
Don't take unnecessary risks. The more security you have through procedures and choice of check form, the less likely that someone will tamper with your checks.
