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Home > Banking Services > Checking > Check Fraud: The 3 Most Common Types
Check Fraud: The 3 Most Common Types
Check fraud is a problem that affects financial institutions, businesses, and individuals in the United States as well as in all other countries around the world. It is estimated by industry sources that counterfeiting and check fraud cost the United States between ten and fourteen billion dollars annually. There are many forms of check fraud, and it is important to understand them in order to know how to handle a situation involving these crimes. The following are the three most common types of check fraud encountered.
One of the most common forms of check fraud is signature forgery. It generally involves using legitimate blank checks with a false imitation of the payer signature on the signature line. Many cases of forged signatures are perpetrated by a person known to the valid payer. “Employees gone bad” are one source of forged signatures. In other cases, signatures are forged on blank checks stolen from the mail while being shipped from the check printer to the account holder. The theft of blank check stock from the mail tends to increase following natural disasters when account holders have to replace destroyed check stock. Other popular form of forgery used by criminals is endorsements falsification. It often involves the theft of valid checks which are then endorsed and cashed or deposited by someone other than the payee. Marital partners involved in separation or divorce proceedings are a common source for forged endorsements. Forged endorsements can also appear on checks made payable to more than one party when one party endorses the check for all parties.
The third most common type of fraud falsification is counterfeit checks, and they are the fastest growing source of fraudulent checks. Check counterfeiters use today’s sophisticated color copiers to copy valid checks. Exact imitations of genuine checks can be created with readily available desktop publishing capabilities. Scanning a real check into a computer, and then using desktop publishing software to change some of the check information, allows the counterfeiter to include many valid check components into the imitation. When this counterfeit check is printed on a high quality laser printer, extremely authentic looking “bad” checks can be created. Some of these counterfeit checks even include MICR (magnetic ink character recognition) line characters. As computer technology continues to become more widespread, this form of check fraud has the potential for explosive growth in the near future. Almost any kind of check can be counterfeited, including cashier’s, payroll, government, and traveler’s checks.
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