What is Check Fraud? How to Protect Yourself from Risky Social Media Trends.

What is Check Fraud?
How to Protect Yourself from Risky Social Media Trends.

“Nothing in life is free” and “if it’s too good to be true, it probably is.”  We’ve all heard these sayings. But a recent viral TikTok trend had people thinking the opposite by leading followers to believe a system glitch could get them free money when in fact it was encouraging them to commit a crime - check fraud.

Check fraud is a serious crime that can lead to bank fees, fines, and even jail time. Unfortunately, as evidenced by the TikTok trend, someone could unknowingly commit check fraud if they are unfamiliar with what it is. In this article, we’ll discuss what check fraud is, its different forms, how you can prevent it, and what to do if it happens to you.

What is Check Fraud?

Check fraud is the use of checks (both paper and digital) to illegally obtain money.  Check fraud happens by creating counterfeit checks, forging checks, altering checks, or intentionally writing bad checks (AKA Check Kiting). Check fraud also happen by negotiating counterfeit, forged or altered checks (AKA Deposit Fraud):

• Counterfeit Check – a completely fake check that is created to look like a real check and trick people or merchants into accepting it as payment. Fraudsters typically use a computer or scanner to create a check that looks like a real one and use stolen information such account numbers and routing numbers that have been stolen from someone else.
• Forged Check – a forged check is a real check that a fraudster obtains, fills out, and fakes the account holder’s signature, payee name, and/or amount. The checks used in check forgery are typically stolen from people/businesses, mailboxes, or purchased from the dark web.
• Altered Check – an altered check usually starts out as a legitimate check, but a fraudster changes either the payee’s name, amount, or date if the check is post-dated. This process is also commonly referred to as “Check Washing” because the fraudster will wash off the various components of the check with nail polish remover or paint thinner in order other fake information.
• Check Kiting - When a check is deposited at a bank, via an ATM, or by remote deposit, it can take up to 10 days for the check to go through the clearing process, AKA the “float” period. This means all funds may not be immediately available to the payee. However, according to the OCC, a bank must make the first $225 available for a cash withdrawal or for check writing purposes at the start of the next business day, and up to $5,525 available after the 7^th business day. Check kiting takes advantage of a check’s “float” period.  Writing or cashing a bad, forged or fraudulent check at a retailer or writing a bad check to a retailer that is more than the purchase amount and requesting the additional funds back in cash. The retailer will ultimately be out the money in this scenario unless the bank agrees to reimburse them for the bad check.
• Deposit Fraud - Depositing a bad, forged, or fraudulent check into a bank account, and then withdrawing or spending the funds before the check clears. In the case of the viral TikTok trend, people were writing bad checks to themselves, depositing them into the ATM, and then immediately withdrawing the funds. The bank account holder is usually held liable for the financial loss resulting from the bad check.

Another example of deposit fraud includes bad actors coaxing an unsuspecting individual to deposit counterfeit, forged or altered checks into their bank accounts and then sending a portion of the check to the bad actor via a peer-to-peer payment provider such as Zelle, Cash App or Apple Cash. The individual is told they may keep the remaining portion for themselves in exchange for their services. The check is ultimately returned, leaving the individual liable for the losses.

How to Prevent Check Fraud from Happening to You

It’s important to stay vigilant when it comes to preventing check fraud from happening to you. Here are some tips to help you keep you and your information safe and secure.

1. Keep blank checks in a safe and secure place at home such as a safe.
2. Shredding old checks instead of throwing them away.
3. Regularly monitor your bank account for unusual activity.
4. When writing a check, always use a pen, always write out the dollar amount in full and draw a line to cover any unused spaces.
5. Familiarize yourself ways to detect counterfeit checks which include:

• Inconsistent magnetic ink character recognition (MICR) numbers. 
• Missing or mismatched bank routing numbers or check numbers. 
• Alterations to the check.
• A check with no address or a P.O. box address. 
  

Being able to identify a counterfeit check is important because should you cash or deposit one, criminal penalties may  apply depending on state laws and whether the check was deposited intentionally. You could also be held liable for covering the amount of the counterfeit check and paying potential overdraft and late payment fees. Additionally, your bank account could be closed by your financial institution, and you could receive a negative rating on your banking history report.

How to Avoid Falling for Risky Social Media Trends

With the rise of social media, viral trends can sometimes encourage risky or even illegal behaviors, such as check fraud. It's important not to fall victim to these trends, especially those that promise quick and easy money. Participating in these activities can result in severe consequences, including financial loss, legal penalties, and damage to your credit. To avoid falling into the trap of viral scams, always research any financial claims or offers before acting on them, stay skeptical of deals that seem too good to be true, and be mindful of advice that circulates online without credible backing.

Here are some tips to help you steer clear of these viral dangerous trends:

• Stay Informed: Always verify information from reputable sources and avoid acting on social media trends without understanding the potential risks.
• Think Critically: If something sounds too good to be true, take a step back and evaluate whether it aligns with legitimate financial practices
• Pause Before Acting: Take time to research or ask a trusted financial professional before engaging in anything that could affect your bank accounts or personal information. Call your financial institution immediately if you are approached or recruited to participate in suspicious activity. Reputable financial institutions want  to know about this activity so they can remain vigilant about check fraud rings. At FNBO you can send an email to report suspicious activity or fraud.

What to Do If You Fall Victim to Check Fraud

If you suspect that you have fallen victim to check fraud, you should do the following:

1. Contact your financial institution immediately and file a report. At FNBO you can do this by calling (888) 530-3626 or by emailing reportfraud@fnbo.com.
2. Contact your local law enforcement agency and file a report.
3. Contact the credit reporting agencies (Equifax, Experian, and TransUnion) and place a fraud alert or freeze your credit report.
4. Update passwords on all your bank accounts.
5. Continue monitoring your bank accounts and credit reports and report any unusual activity.