Did you know 63% of organizations experience check fraud? According to an AFP® Payments Fraud and Control Report, checks are considered the most vulnerable payment methods susceptible to fraud. That’s because checks contain significant sensitive personal information like bank account and routing numbers, physical addresses, and signatures.

While checks are clearly the most susceptible to fraud, they are still widely used among older generations. That’s why businesses must know how to detect and prevent check fraud to safeguard their company and customers.

Here’s everything business owners should know to avoid check fraud.

What is check fraud?

Check fraud is when an unauthorized person uses someone else’s checks, or images of a check, to make purchases or withdrawals. There are three primary methods by which check fraud is committed:

• Check theft: Scammers steal or forge another person’s checks to make unauthorized purchases. To avoid check theft, you should always store them in a safe and secure place.
• Check washing: Fraudsters alter or “wash” legitimate checks with chemicals to erase the ink and then rewrite transaction amounts and payees.
• Mail fraud: Scammers defraud others by sending or receiving altered checks through the mail.

How to protect your business.

It’s critical for businesses to implement safeguards against check fraud. Consider these five methods to keep an eye out for potential check fraud scams:

1. Educate your employees.

All employees should know best practices and company policies to help protect and limit access to sensitive information and business checks. By adopting a need-to-know policy, business owners can ensure employees know enough to protect the company from fraudulent activities while still being able to secure sensitive information. The American Bankers Association^© has a wide range of resources and handouts to help educate employees.

2. Implement fraud prevention programs.

Several banks offer fraud prevention programs (FPPs) to help safeguard their accounts. Some of these programs use policies, technologies, and practices to detect and prevent fraudulent transactions, ensuring checks are not mishandled by unauthorized individuals. FPPs can also provide additional security measures for checks drawn from specific accounts to quickly detect fraudulent activity.

3. Consider Positive Pay.

Positive Pay adds another layer of validation protection to the check process. It helps banks detect fraud by comparing the company’s issued check with the payment check. This program ensures that the dollar amount, check number, and account number match. If they don’t, the check will be flagged and returned to the business for review.

4. Monitor your accounts.

It’s important to frequently monitor your accounts to ensure all checks are cleared for the right amount and paid to the right person. With check washing becoming increasingly popular, some altered checks can easily slip through the cracks if you’re not performing daily reviews.

5. Secure your mail.

The United States Postal Service (USPS) reported postal inspectors recover more than $1 billion in counterfeit checks and money orders yearly due to check theft. When checks are sent via mail, fraudsters can intercept and “wash” the check to change the payment amount and designated payee details.

Businesses can avoid the risk of a check being stolen by closely monitoring their accounts, confirming the intended recipients receive all financial information sent by mail, and flagging any documents that are not. Business owners should always opt to make invoice or vendor payments electronically, but when checks are the only payment method, they should never be left in a mailbox overnight.

6. Keep an eye out for bad actors.

“Bad actors” are individuals who try to intercept business checks by targeting inbound and outbound mail. Others may recruit insiders to access bank accounts or personally identifiable information. By stealing sensitive data, “bad actors” can create counterfeit checks or sell the information online. Additionally, business email compromise is a growing cybercrime used by “bad actors.” This method uses email to trick business owners into paying fake invoices via check, wire, or ACH. 

What to do when you detect check fraud.

If your business detects check fraud, you should immediately contact your bank to report the fraudulent check and place a stop payment, if possible. After notifying your bank, you should:

• Gather all relevant details about the check to file a police report.
• Report the fraud to the U.S. Postal Inspection Service^©.
• Notify the Federal Trade Commission (FTC).

In the end, implementing safeguards, educating employees, and taking preventative action can help protect your business and customers from check fraud.

For more tips and tricks, visit our Fraud Prevention page at efirstbank.com.  

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Published: March 10, 2025