It takes some diligence, but with the right knowledge, a reliable banking partner, and the use of effective tools, you can empower yourself to safeguard against potential threats like check fraud schemes.

What does the fraud look like?

Here is a typical example of what business customers are experiencing:

A business customer drops a check payment in the mail payable to their vendor. At some point along the way, the check is stolen by criminals. (Criminals target USPS blue collection boxes, unsecured residential mailboxes, and privately owned cluster box units – such as at high-density commercial buildings.) The criminals will then do one of two things: either “wash” the check or create counterfeit checks from the original.

Check washing and counterfeiting, oh my!

In check washing, criminals use chemicals to remove the original payee information and replace it with their own personal name, or the name of a business account that the criminal controls. They may also increase the dollar amount of the check, sometimes by hundreds of thousands of dollars. Washed checks may also be copied, printed and sold to third-party fraudsters on the dark web and encrypted social media platforms in exchange for convertible virtual currency.

Counterfeiting is done by using the bank routing number and account information from the original check item to create multiple copies for future use by the fraudsters. They may try to duplicate some of the logos and security features from the original check, but frequently they just print the information onto similar looking stock images that they can download directly from the internet. It isn’t uncommon to see spelling errors and crooked logos on counterfeited checks.

In most cases, the newly printed business payee on the fraudulently washed or counterfeited check is just a “fake” company. Because of the ease of registering new businesses online in today’s world, the “fake” company appears legitimate on paper – it has a valid tax ID from the IRS, Articles of Incorporation, a Certificate of Good Standing from the Secretary of State, and probably even has an online presence. But the “fake” company is really only created to be used for a very short time – just long enough to defraud one legitimate business out of as much as possible before someone figures out the scam. They might deposit checks in person, through ATMs or via mobile deposit, but once the funds are in the account, they will rapidly withdraw as much cash as possible through ATMs or send wire transfers to another account they own, and before our customer notices any discrepancy in a check payee or amount and are able to file a dispute, the funds are gone.

The fraudsters are hoping that no one at the bank is paying attention, and in fact will deliberately choose to open accounts for their “fake” business at large, well known banks, where they believe their criminal activity is more likely to go undetected. 

This is where it pays to have a trusted advisor as a banking partner.

The good news is that most banks are on the lookout for your best interest and can help protect you from fraudsters. At Falcon National Bank, we know our customers, and we know what “normal bank account activity” looks like for them. Our staff is trained to identify potential fraud involving business accounts, from the largest account to the smallest. When we see something that doesn’t look right, our retail staff will reach out to the business owners and work with their employees to stop the fraud. Thankfully, in several instances, we have been able to help prevent huge losses for our business customers. 

Tools that businesses can use to protect themselves.

• Take advantage of on-line banking and monitor check activity. If possible, do it daily
• Whenever possible, use ACH and other electronic payment options.
• Take advantage of our Positive Pay option.
• Consider enrolling in our Cash Management program.

All of these tools are designed to help keep your business accounts secure and make it harder for the criminals to access your money.

If you would like information on any of these products or services, please reach out to our Treasury Management group and we’ll be more than happy to work with you!