Check Fraud

Last Reviewed: August 2024

Check Fraud is still prevalent among fraudsters. Financial institutions and their members should be aware of check scams and how to avoid falling victim.

Print Cashier's Check Fraud

Check Fraud: Cashier's Check Fraud

The Office of the Comptroller of the Currency (OCC) details cashier’s check fraud and how to avoid it, as cashier’s checks have recently become more popular among fraudsters. The result of all fraudulent cashier’s check scams is that the check will be returned unpaid.

Common scenarios involving a fraudulent cashier’s check include:

Selling goods – credit union member receives a cashier’s check as payment.
Excess of the purchase price – a member receives a cashier's check for more than the requested payment amount and requests to wire the excess funds to a third party.
Unexpected windfall – a member receives a letter saying that they have won a sum of money, also receiving a cashier’s check to cover upfront fees. The letter will ask them to wire the fees to a third party.
Mystery shopping – a member receives a letter saying that they have been selected to function as a mystery shopper, also receiving a cashier’s check to purchase the designated merchandise; the member may request a wire transfer for a portion of the funds to be sent to a third party.

Fraudulent cashier's checks can be very difficult to identify, but the OCC offers the following tips for avoiding cashier's check fraud:

Be cautious about accepting checks and verify the check’s sender from an independent third party when possible.
Verify the check’s legitimacy by calling or visiting the financial institution on which the check was written; but, do not use the telephone number provided on the check.
Know that even if funds are available for withdrawal, the check may not have cleared.
Be cautious if the member appears pressured to act quickly and urgently requests to send funds via wire transfer.

Report fraudulent checks to the following:

Federal Trade Commission (FTC): 1-877-FTC-HELP or file an electronic complaint via their Internet site at http://www.ftc.gov.
Federal Bureau of Investigation (FBI): http://www.ic3.gov.
U.S. Postal Inspector Service: 1-888-877-7644 or via email at https://ehome.uspis.gov/fcsexternal/default.aspx.

Print Mail Theft-Related Check Fraud

Check Fraud: Mail Theft-Related Check Fraud

FinCEN and USPIS issued an alert regarding mail theft-related check fraud schemes, as fraudsters are increasingly committing check fraud and are targeting the U.S. mail system. Fraudsters will steal checks and “wash” the checks to replace the payee information and the dollar amount. They may then cash or deposit these altered checks at credit unions through automated teller machines (ATMs), in person, or through remote deposit.

FinCEN and USPIS have identified the following red flags for mail theft-related check fraud. Be aware of these to better detect and prevent check fraud.

Non-characteristic large withdrawals on a member's account via check to a new payee.
Member complaints of a check or checks stolen from the mail.
Member complaints of a mailed check that was never received.
Checks used to withdraw funds from a member's account appear to be of a noticeably different check stock than check stock used by the issuing bank and check stock used for known, legitimate transactions.
An existing member with no history of check deposits has new sudden check deposits and withdrawal or transfer of funds.
Non-characteristic, sudden, abnormal deposit of checks, often electronically, followed by rapid withdrawal or transfer of funds.
Examination of suspect checks reveals faded handwriting underneath darker handwriting, giving the appearance that the original handwriting has been overwritten.
Accounts with indicators of other suspicious activity.
A new member opens an account that is seemingly used only for the deposit of checks followed by frequent withdrawals and transfer of funds.
A non-member that is attempting to cash a large check or multiple large checks in-person and, when questioned, provides an explanation that is suspicious or potentially indicative of money mule activity.

If a credit union has identified or suspects mail theft-related check fraud, FinCEN recommends the credit union file a SAR and refer the victim to the USPIS hotline to report the incident.

Click here for SAR filing instructions.

Presentment Warranty Claim

UCC 4-208 allows credit unions to pursue a breach of presentment warranty claim against a depository institution that accepted a member's altered check. Since the institution breached the warranty that the check is not altered, your credit union may be able to recover the losses.

Losses can be potentially recovered from a member's altered check or form of a check that contains a forged endorsement.

Print Additional Resources