Category Archives: Check Approval and Processing

How to Identify a Counterfeit Check
By Emily Shap

Counterfeit check scams are on the rise. Counterfeit checks have become harder to detect with criminals producing high quality “look-alikes,” equipped with authentic watermarks and real bank account numbers. Some look so real that bank tellers have reported being fooled. Counterfeits make up the largest amount of bad checks passed each year, around 27%, followed by forged at 24%. Federal law requires banks to make funds available to their customers within a few days, whether the check has been authenticated, or not. This leaves unsuspecting merchants responsible for a counterfeit long after the check has been cashed.

According to the Federal Trade Commission, “Under Federal Law, banks must make funds available to you from U.S. Treasury checks, official bank checks (cashier checks, certified checks, and teller checks), and checks paid by governmental agencies at the opening of business the day after you deposit the check. For other checks, banks must similarly make $100 available the day after you deposit the check. Remaining funds must be made available on the second day, after the deposit, if payable by a local bank, and 5 days if drawn on distant banks.”

Forged checks can take weeks to be discovered. Merchants must remember that they are responsible for any funds withdrawn against counterfeits. Just because the funds are available, does not mean the check is good. Business owners can protect themselves against scams by following some check cashing guidelines.

Ask for Identification
Before accepting a check for payment, ask for proper identification. Compare the name and address imprinted on the check to the name and address on the I.D; they should match. Ensure that the driver’s license has not expired. 50% of forged checks are passed with an expired driver’s license. Make sure the check is signed, and the signature name matches the name on the I.D.

Establish Check Dollar Limits
Determine the largest dollar amount you will accept via check, and stick with it. Criminals passing a bad check will try to write it for as much as they can. Having a set check dollar amount reduces your risk. Always compare the written and numerical amounts on a check. The written amount always overrides the numerical amount.

Personal Checks Only
Limit your exposure to counterfeit checks by refusing to accept 2nd or 3rd party checks. Personal checks should come from a local bank, or a bank with a local branch. Call the bank directly if you have any questions about the validity of a check. Counterfeit payroll checks continue to be a favorite among criminals.

Look at the Check Numbers
Only accept checks with check numbers greater than 500. Even though banks can assign higher check numbers, 90% of all bad checks have check numbers less than 500.
Familiarize yourself with check routing numbers. The first two digits represent Federal Reserve Bank locations; take note of the numbers you see frequently. Many times, counterfeiters will change these first two routing numbers to elude banks. The alteration buys them additional time before the counterfeit is revealed.

Be Aware of Overpayment Scams
Never accept a check that is written for more than the purchase amount. Overpayment scams have become popular where merchandise is being sold on online auction sites and classified ads.

Check Appearance
Take a close look at the check being presented. Never accept a check that appears to have been altered. Counterfeit checks may seem different, a little off, in their color, feel, perforation, and MICR line ink.

· Color: Counterfeit checks may have a slightly different color than the other checks in your drawer. Checks that have had original information removed, or “washed,” may have faded areas.
· Feel: Fake checks may have a lower-quality feel than authentic checks.
· Perforation: Checks should have at least 1 rough, or perforated edge.
· MICR line ink: The account and bank numbers printed on the bottom of the check should appear shiny or glossy. A glossy look is characteristic of the magnetic ink banks use. Many forgers lack the ability to encode with magnetic ink, substituting regular ink instead. Account and bank numbers printed in non-magnetic ink will appear dull and reflective.

Bad checks cost business owners and consumers approximately 12 billion dollars a year. Half of this is directly linked to fraud. Protect yourself and your business by following some check cashing guidelines: check appearance, overpayment amounts, check numbers, type of check, creating dollar limits, and requiring proper identification. Remember that you are always responsible for any funds you withdraw against a check, no matter what. Just because a check has cleared does not mean it is valid. It can take weeks for certain counterfeit or forged checks to be revealed. The bank will hold the person who deposited the counterfeit check accountable. If you suspect a check scam, contact the Federal Trade Commission at 1-877-FTC-Help.