Eric Fischgrund runs Fisch Tank PR, a PR firm employing 30 people. Clients mailed 15 checks to him that a crook or crooks stole after they had gone through a Postal Service distribution center. The bad guys cashed 10 of them, reported a June 13, 2023, Associated Press article.
The checks were stolen in March, but Fischgrund didn’t become aware of the problem until April after several of his always-on-time clients missed payments. After the Postal Service investigated, Fischgrund recovered 70 percent of the revenue, but some cases remain unresolved as of the time the AP article appeared. The crooks had used one of the techniques check fraudsters use to alter the checks so they could be used for purposes other than what they had been written for. More about those techniques in a moment.
Now Fischgrund asks for electronic payments only. “I think we’ll never go back to asking for checks as an option,” he said.
Mr. Fischgrund’s experience is far from unique. Banks reported around 680,000 check frauds in 2022 to the Financial Crimes Enforcement Network (FinCEN). That’s up from 350,000 in 2021. The US Postal Service also reported some 300,000 complaints of mail theft, more than double the previous year, which may or may not be in addition to the FinCEN numbers. But the Federal Reserve reports that fewer people write checks anymore, the number of checks it collected having dropped 82 percent over the last 30 years.
Crooks have found checks to be an easy mark for fraud. No cyber hacking skills required, just old fashioned thievery and chemistry. David Maimon, an associate professor of Criminal Justice at Georgia State University explains in an article in TheConversation.com, crooks steal mail from personal mail boxes or neighborhood collection boxes using keys they have copied, stolen, or paid as much as $1,000 for on the dark web. Then they wash the ink off the payee and dollar amounts often with nail polish remover and post the altered checks on the dark web for sale for an average each of $175 for personal checks and $250 for business checks payable in untraceable bitcoin. They might also use the check themselves adding a different payee and larger payment amount. “Presto,” free money. The likelihood of getting caught, slim to none. Well, slim, anyway. Last year in Southern California, law enforcement arrested 60 people for committing more than $5 million in check fraud against 750 people. But, that’s a number that’s hardly a blip on the crook radar compared to the number of check frauds every day.
Banks usually make good on the stolen checks, but sometimes it can take considerable time and in the meantime, the account holder is out the stolen money. But the banks end up the biggest losers. Statista.com reports that in 2022 financial institutions estimate they lost almost $2 billion to check fraud of one variety or another.
Stolen checks also lay the groundwork for Identity Theft, opening up an avenue to steal victims’ identities as checks provide all the information regarding people’s identities needed to steal an identity. Checks have the name and address of the account holder printed on them, and crooks use that to open bank accounts and apply for loans on behalf of the victims.
Mail theft has reached such proportions that the Postal Service advises people to mail checks from the Post Office itself rather than their own mail boxes or the neighborhood collection boxes. But we have to wonder how that relates to Eric Fischgrund’s checks having been stolen from a post office distribution center. In spite of that, the US Postal Service, reported NPR, has withdrawn funding for postal inspectors, the very people tasked with dealing with mail theft.
The Postal Service’s response? “The U.S. Postal Inspection Service takes seriously its role to safeguard America and will continue to aggressively pursue perpetrators that use the U.S. mail system to further their illegal activity.”
Checks stolen from the Postal Service are just one method of check fraud. David DeNicola writing for Experian describes four types of check fraud in addition to the stolen check-altering method. Some we recognize from the olden days, others provide a new wrinkle for crooks.
What’s called “paper hanging” takes advantage of the “float.” The check writer pays for a product or service with a bad check. The recipient deposits the check in good faith and discovers several days later that the check bounced. It takes three days or so for a check to clear the bank, and since banks pay on checks immediately, the bad guy disappears before the check bounces.
Another old standby, “check kiting,” involves using multiple bank accounts. Someone writes a check from Bank C where he has sufficient funds, covers the amount he wrote the check for in his account in Bank W where he doesn’t have sufficient funds. That can go on for several iterations before the kiting scheme runs out of money sources.
“Check washing” I just described above.
“Check cooking,” similar to check washing, involves scanning a stolen check and using software such as Photoshop erasing the payee name and amount, adding a new payee and a much larger amount, and then cashing the Photoshopped check.
Another old standby, “check theft and forgery” involves crooks stealing blank checks, maybe from a mailbox, and forging the signature of the legitimate account holder.
With so many ways to be a bad guy, it’s hard to keep up with all the permutations and combinations crooks use to steal money. Always creative and imaginative, they constantly look for new ways to scam the public.
How to protect ourselves? One obvious method is don’t write checks; rather, use the electronic pay systems available through banks and companies you do business with. Have people send you money through direct deposits to your bank account. That saves a 65-cent First Class Mail stamp and the nickel or so for the envelope, not to mention the time and effort of going to the Post Office to deposit the mail. Sure, crooks hack into the pay systems of companies, but you are protected because once you make a payment, you get a confirmation. Then even if crooks steal all the money, you have proof you paid.
