Why Check Fraud Remains a Serious Business Risk

What businesses need to know about this persistent threat

An Interview with Mark Laskoski, Director of Fraud Risk Management

Even in an increasingly digital world, checks still play an important role in how businesses make payments. That is one reason why check fraud continues to be a serious concern. This type of fraud has evolved over time, with criminals finding new ways to alter, intercept, and misuse paper checks. For businesses of all sizes, the impact can go well beyond a single financial loss. It has the potential to disrupt operations, create time-consuming recovery efforts, and strain relationships with vendors or clients if payments are delayed or redirected. Understanding how check fraud happens is an important first step in reducing your risk.

As part of our fraud education series, we spoke with Mark Laskoski, Director of Fraud Risk Management at Five Star Bank, about why check fraud remains a serious business threat and how to mitigate the risk.

Q: Why is check fraud such a problem?
Mark: Checks are still a common way businesses pay vendors, suppliers, and service providers, so they remain a popular target for fraud. Since checks move through the mail and pass between multiple hands, there are more opportunities for them to be stolen, altered, or forged. In many cases, fraudulent activity is not discovered until a business reviews its accounting activity, and by then it can be much harder to recover the money.

Q. How does check fraud typically happen?
Mark: There are several common ways this happens. In some cases, criminals use check washing, which means they remove the original information from a real check and rewrite it. Other times, they create counterfeit checks that look legitimate, forge signatures, or alter a check so the payment ends up going to someone else. There’s also an increase in fraud tied to mailed checks. A check placed in a mailbox or collection box may be intercepted, altered, and deposited before the intended recipient ever receives it. Stolen checks, altered checks, counterfeit checks, and fraudulent mobile deposits can all create costly problems if they are not detected quickly. And because many businesses do not identify the issue until account reconciliation, the financial impact may have already occurred by the time fraud is detected. 

In recent years, mail theft-related check fraud has increased significantly, with criminals using stolen checks to create counterfeits, alter payee and dollar amounts, or fraudulently negotiate checks before the intended recipient receives them. 

Q. How can businesses protect themselves?
Mark: Start by reviewing your payment processes, limiting unnecessary check usage, and using safer mailing and handling procedures whenever possible. Tools such as Check Positive Pay may help identify unauthorized or altered checks before they clear, while strong treasury management practices can go a long way in reducing opportunities for fraud. 

By staying aware of how fraud happens and taking steps to monitor and protect outgoing payments, organizations can better safeguard their finances and maintain confidence in their payment processes.

To learn more about fraud prevention tools and ways to help protect your business accounts, visit the Five Star Bank Security Center.