Check fraud resulting from organized mail crime has surged over the past year according to government agencies and law enforcement.
Businesses, individuals and the government are undertaking numerous steps to deter this crime and protect against financial losses and identity theft. Scrap metal recyclers issuing many checks to vendors are among the industries vulnerable to increasingly sophisticated methods of check fraud.
According to a June Associated Press report, last year banks issued roughly 680,000 reports of check fraud to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. That’s up from 350,000 reports in 2021. Meanwhile the U.S. Postal Inspection Service reported roughly 300,000 complaints of mail theft in 2021, more than double the prior year’s total.
How Mail Crime and Check Fraud Happen
The most common type of check fraud occurs when thieves steal mail out of United States Postal Service (USPS) blue collection boxes, commercial mail bins or even residential mailboxes. Other reported crimes include gangs robbing letter carriers of mail and the “arrow” keys that open USPS boxes around their area. Once checks are stolen, criminals will commonly “wash” the checks, changing the payee’s name on the check and the amount of money, often increasing it by thousands of dollars, according to the U.S. Postal Inspection Service. Criminals can use something as simple as nail polish remover for check washing.
Some criminals are going further and using the information found on a check to gather sensitive personal data on a potential victim. There have been reports of criminals creating fake entities out of personal data obtained from a check, opening new bank accounts, lines of credit or businesses with that data as well.
Why Check Fraud is on the Rise
There are numerous reasons for the increase in check fraud, according to financial crime experts. Reports of check fraud increased dramatically during the pandemic as criminal gangs formed to target the abundance of government stimulus checks. Even as the COVID relief checks slowed down, these thieves continued the fraud by stealing bill payments and other checks from the mail. Improved verification methods for credit and debit cards and EMV chip technology in cards have made it harder for criminals to profit from stolen or counterfeit cards, thereby making check fraud more lucrative.
The rise of social media also plays a significant role in the operation of this criminal behavior, according to a report last year on National Public Radio. Thieves use controversial instant messaging platforms like Telegram which allow anonymous users and encrypted data. Using the dark web, criminals will sell stolen checks, recruit “walkers” to take stolen checks into banks, and share information on committing financial fraud.
Check Fraud and Scrap Metal Recyclers
Scrap metal recycling companies have long dealt with the potential for check fraud because of the large volume of payments they make. Some state and municipal governments, to crack down on scrap metal theft, instituted laws requiring scrap metal recyclers to pay by check and not by cash. Laws such as these put some companies in the position of writing hundreds of checks per week.
ScrapWare Corp., a Maryland-based software company serving the scrap metal recycling industry, has built features into its product to help customers address the potential for check fraud. ScrapWare works with a service called Positive Pay, a check anti-fraud system offered by financial institutions. When ScrapWare generates a purchase transaction that is paid by check, ScrapWare automatically sends the check information to the bank. When the original paper check is cashed, the bank compares the amount on the paper check and the data recorded on Positive Pay, ensuring there was no check forgery.
For companies concerned about writing many checks, ScrapWare sends information to Positive Pay every 15 minutes. When the Positive Pay information does not match the check, the bank notifies the customer through an exception report, withholding payment until the company advises the bank to accept or reject the check. Positive pay means you pre-authorize checks for a certain amount as well as the check number, cutting down criminals’ ability to wash the check and withdraw money for an amount that isn’t pre-authorized.
Efforts to Protect Against Check Fraud
In May, the USPS announced several new measures to protect against mail theft. USPS plans to install 12,000 new blue collection boxes in high-risk areas across the country. The new high-security boxes no longer have a drawer that pulls open for inserting mail, instead these boxes have just a narrow mail slit at the top. Additionally, the postal service is replacing 49,000 arrow locks on postal boxes with electronic locks, so thieves can no longer steal keys to have access to the boxes.
Financial crime experts now recommend people avoid sending checks in the mail. Bill payments are safer via electronic transfer. If you must mail a check, don’t place it in your residential mailbox. Instead, drop it off inside the post office.
The U.S. Postal Inspection Service makes these recommendations for ways consumers can protect themselves:
- Avoid writing checks with blue or black ink. Instead, use a gel pen. Gel pen ink cannot be washed away.
- Walk your mail into a USPS office and avoid dropping it into a blue collection box. If you rely on the collection box, drop your mail in prior to the last daily pickup time listed on the box so it does not sit in the box overnight.
- Don’t let incoming or outgoing mail sit and accumulate in your mailbox. Promptly remove your mail from your mailbox, especially if you’re expecting checks or credit cards.
- Monitor your financial accounts and credit profiles for fraudulent activity. The USPS stresses that early detection is important.
The American Bankers Association (ABA) also has recommendations to avoid check fraud. They tell consumers when writing checks to use pens with indelible black ink, which is harder to wash off a check. They also tell consumers to verify the deposit with the check recipient and to review bank statements to find illegal transactions. Banks, keenly aware of the problem, are increasingly watching for signs of fraud at branches and through mobile check deposit services, including large check deposits. They’re training branch employees to take steps such as looking at check numbers, because checks are typically written in order, or noticing when a check is being written for a much larger amount than the customer’s previous history would indicate. Banks also now deploy software at their branches that can tell how risky a check might be.
If you do fall victim to check fraud via mail theft, the U.S. Postal Inspection Service recommends you file a report with local police and the postal inspection service by calling 877-876-2455.
About ScrapWare Corporation: Since 1989, Rockville, Maryland-based ScrapWare Corporation has been the software of choice for the recycling industry. Its ease of installation and simplicity saves users time and money while helping them achieve compliance and maintain accurate business insights. With state-of-the-art functionality that‘s tailored to each organization’s unique requirements, ScrapWare is an advanced dynamic software solution that alleviates the most pressing recycling industry worries. For more information, please call (301) 517-8500 or visit https://www.scrapware.com/.