What To Keep in Mind When Talking About Fraudulent Check Scams

During the Covid-19 pandemic, relief checks issued by the government became a target for thieves. Since then, incidences of check fraud continue to skyrocket.

What is “check washing”?

The term “check washing” refers to the fraudulent alteration of a stolen check. Check-washing crooks can alter the payee’s name or the amount on the check. Checks can even be *literally* washed with chemicals to remove the ink. The United States Postal Service indicates that 1 billion dollars in counterfeit checks and money orders are recovered every year.

Who’s responsible for a fraudulent check if the perpetrator isn’t caught?

There are a number of regulations in place, but multiple factors can come into play. For example, the uniform commercial code states that after receiving their statement, a customer has one year to notify their bank or they could be held liable. In addition, banks can define these parameters in their account-holder agreement. These agreements should be proofread to make sure the language is compliant, especially since rules regarding forgeries can vary. Some of it comes down to common sense: If you leave your personal checkbook where it’s likely to get stolen, you could be held liable if it is. But if the bank cashes a check that’s clearly been tampered with, it will likely fall on them. Kind of like the guy in 1995 who deposited the fake checks received in the mail for $95,000 and the bank accidentally cleared it. Often one may have to get legal representation to sort out who is ultimately responsible.

How can I protect myself with insurance?

Keep in mind when adding identity theft protection to homeowners, those plans do not typically include loss of actual money, which is where check forgery would typically fall. Identity theft plans, such as Life Lock, do advertise reimbursement of stolen funds. A consumer will want to read the individual contract to confirm check fraud is included. For businesses, crime insurance typically provides coverage for robbery and employee theft as well as forgery. So it’s best to contact your local insurance agent to find out what is included in your current plan, in case a business check ends up in the wrong hands.