Check Washing and Other Types of Check Fraud

It’s your little niece Georgie’s birthday next week, so you pull out the checkbook and write a check for 30 bucks. Georgie lives in The Middle of Nowhere, Idaho, so you put the check in a card and drop it in one of those locked blue mailboxes when you walk the dog.

Next week, you call up Georgie on her special day expecting to hear a sweet, “Thank you!” But she says she never got your check. Then you look at your bank account and find $9,000 missing!

Obviously, something rotten is going on here. The most likely scenario: Someone stole your mail and committed check fraud by washing your check (yes, that’s a thing) and writing in a new amount and recipient. Recently, instances of check fraud like this have skyrocketed, making it more important than ever to take safety precautions and learn how to avoid being a victim.

We’ll talk about the most common ways the bad guys use checks to steal so you can be on your guard and keep your money in your bank account.

 

What Is Check Fraud?

Check fraud happens when someone shady uses a check (personal or business) to steal money from individuals and businesses. Thieves steal millions of dollars this way every year.

The number of stolen checks for sale on the darknet (that’s the bad side of town on the internet) tripled over the course of a few months in 2021, and it’s still going up.¹ Criminals can commit fraud using checks in all kinds of ways, which makes the investigation of check fraud by banks, businesses and law enforcement a tricky business.

How Is Check Fraud Currently Affecting People?

Even though more and more people choose to handle their banking digitally, check fraud appears to be picking up speed. This is because, old-fashioned as it is, it works, and criminals are realizing there’s very little in place to stop it. And now, with new technology that allows you to deposit a check with your smartphone, crooks don’t even have to go to the bank to commit check fraud.

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People are losing millions of dollars as thieves cash checks that have been altered or use bad checks to buy stuff. But that’s not all. Criminals also use the information, like names and addresses, off checks to steal people’s identities. Then they can apply for loans, open credit card accounts, and wreak all kinds of havoc.

Types of Check Fraud

Criminals are super creative at coming up with different ways to use checks to steal, so not all check fraud is the same. Many types of check fraud rely on the float time (the chunk of time between when you write a check and when the bank moves the funds out of your account). Others involve forgery and chemicals. Here are a few of the ingenious ways thieves use check fraud:

Check Washing

Scene: A woman slaps on a pair of rubber gloves and fills a small tub with nail polish remover. One by one, she dips check after stolen check into the acetone until all the handwriting dissolves and then hangs them up to dry on the line. Next, she takes photos of the blank checks and posts them for sale on the darknet.

Not your typical laundry day, but it’s certainly an expensive one costing Americans millions. 

One way to avoid your checks being chemically altered is to use pens with permanent ink.

Paperhanging

With this kind of fraud, people purposely write bad checks knowing they don’t have the money in their account to cover it. Sometimes they open an account purely for the purpose of paperhanging.

These bad checks are often used to buy goods or services. By the time the bank figures out the check is bad, the fraudster has skipped town and the business or individual who sold the goods are out of luck.

For example, imagine you’re selling your sweet Nintendo 64 and a case of vintage video games on Facebook Marketplace. Brad Pits messages you and says he “needs them lol.” You arrange to meet.

After Brad looks them over, he agrees to pay your price of $450 and asks if you have change. Brad says all he has is a check for $700. He’ll give you the check and let you keep an extra $100 for being so nice if you can give him $150 cash. It sounds like a deal! Plus you already went to the trouble of changing out of your pj’s to meet this guy. So you agree.

Too bad. See, the next day when you go to the bank to cash the check it will bounce because Brad’s check was bad. Now you’re out $150 and you can’t play Mario Kart 64!

The only way to really avoid bounced checks is not to accept personal checks from anyone you don’t know. If you’re selling a big-ticket item, like a car, where cash doesn’t make a lot of sense, you could require the buyer to pay with a money order, which is like a prepaid check. Buying and filling out a money order is simple and costs practically nothing—so don’t feel bad for insisting.

The only problem you might run into with this is money orders have a limit of $1,000. So the buyer may have to order several. Also, beware that fake money orders are also a problem, but you can call the business that issued it to make sure it’s real.

Another option is a bank check, which comes in two forms: a certified check and a cashier’s check. With a certified check, though, your personal information is on the check, which is a bad option if you’re the one paying. With a cashier’s check, make sure you verify the check by calling the bank that issued it (look up the phone number yourself—don’t rely on the number on the check). Also, both of these options are more expensive than a money order.

Check Kiting

This version of check fraud relies on float time. Using two separate bank accounts, a crook will write a check from one account to the other. This creates a fake bank account balance, making Account 2 appear to have money in it even though it doesn’t. Then they’ll write a second check from Account 2 to Account 1 for the same amount so Account 1 will also appear to have money in it and the first check will clear (they do this to avoid the fee that comes when a check bounces). When you do this over and over again, it’s called kiting.

Check kiting doesn’t always result in anything stolen, but it’s still illegal. Some people do this to avoid a check bouncing, treading water until their paycheck comes in to cover the original check. Other people withdraw cash and make a run for it.

Check Floating

This is the linchpin behind many of the other frauds. It’s simply where a thief writes a bad check and relies on the lag time between when they wrote the check and when the recipient tries to cash it. During that time, it appears like they have money in their checking account, allowing them to write more bad checks or even withdraw the money.

Check Forgery

This is a classic. A bad guy (or gal—we’re not chauvinists) obtains a check (we’re going to assume they stole it) and slaps a forged version of the real check owner’s John Hancock on it. Let’s be real, bank tellers aren’t forensic handwriting experts—they probably won’t be able to tell if the signature on the check cashed is real or fake. So, the fraudsters walk away with a fat wad of cash.

Another type of forgery involves faking the endorsement and then pretending to be that person at the bank and cashing it. Or sometimes the fraudster will try to convince a victim to give them cash in exchange for an endorsed check.

Don’t make it easy for thieves to steal from you by forgery. If you’re depositing a check via mobile banking, or are throwing out a cancelled check or any unused checks, make sure to write void across the front and tear them up for extra measure.

Check Theft

Check theft plays a big role in many of the types of fraud we talked about, including check washing and forging.

Mailboxes, particularly the big blue ones on street corners, are the biggest target for robbers looking for checks. Thieves steal USPS workers’ mailbox keys and empty the boxes. Can you imagine your sweet old mailman getting held up for his keys? It’s the Wild Wild Midwest and your cul-de-sac could be next. Keys for sale on the darknet are going for up to $7,000!²

To keep your checks from being stolen in the mail, take them directly to the post office—don’t leave them in the blue boxes or your own personal mailbox. Check your mailbox regularly and don’t leave incoming mail in the box overnight.

Another similar fraud is check counterfeiting where bad guys steal an account number and print fake checks using it. Then they have a whole stack of checks they can make out to themselves: Pay to the order of me.

Account Takeover

An account takeover is when a thief gets access to your bank account and starts writing checks from it. It’s actually a form of identity theft. Criminals can get into your account through online portals or even by going into a bank branch and pretending to be you. And writing checks to themselves from your account isn’t the only thing they can do at that point, so beware.

Another type of check fraud involving identity theft happens when someone gets your personal information and opens a fake bank account (well, technically it’s real, but it’s not yours) and writes bad checks from the account in your name.

There are lots of measures you can take to make your bank account more secure and prevent identity theft, including choosing a strong password and changing it often.

Mail Fraud

Technically, mail fraud happens anytime the U.S. mail is used for criminal activity. In case you don’t watch a lot of Law & Order, this is the all-time favorite of prosecutors. (The defendant embezzled $1.3 million? He mailed a bank statement in the process? Mail fraud!—we got him!)

What you need to worry about is when your mail or mailbox is tampered with.

For instance, criminals will send fake sweepstakes or lottery announcements exclaiming, You won! All you need to do to claim your prize is provide some personal info and send some money to cover shipping and handling, processing, and taxes.  The crooks then keep your money and never send a prize. And in some cases, they’ll use the account numbers on your check to steal more of your hard-earned cash.

Chain letters asking for money are another version of mail fraud. And mail theft is a big problem too—that’s when thieves steal your mail hoping to find checks.

Checks aren’t the only thing thieves are looking for in your mail. If you’ve recently requested a new debit card and they find it first, jackpot. They can take down all the numbers and seal it back up so you won’t realize you’re a victim of debit card fraud until they’ve already bought a boat, a 1,000-inch TV and a bajillion special edition Nikes.

Mailbox Fishing

No, this is not where you cast your line into the lake hoping to catch a large metal box with a flag on it. This is the term for when thieves steal mail from the blue USPS boxes by fishing through the mail slot rather than using a key. In this case, if you give a man a fish, he’ll eat for a day. If you teach a man to fish, he’ll be a criminal for life. Don’t have a card to pay for that new Gucci bag? Go fish! (Just kidding. Please don’t go fishing for checks.)

Protect Yourself

There are things you can do to help make your checks and mail safer, like giving them directly to the mailman, but at the end of the day once that envelope leaves your hands, it’s out of your control.

Kind of scary, we know. But if you have a solid identity theft protection plan in place, it can go a long way to giving you peace of mind about the security of your sensitive data, documents and checks.

We recommend RamseyTrusted provider Zander Insurance for identity theft coverage. Their plan works hard to protect you from identity thieves—and if something does happen, they’ve got your back. Zander will:

• Monitor your information in real time and alert you of any risks
• Provide full-service identity recovery services for you if needed (they’ll clean up the entire mess for you!)
• Recover up to $1 million of stolen funds (including legal fees)

Check out Zander’s identity theft protection plan today!