Check fraud can wreak havoc on B2B companies and their customers. Worse, it’s not going anywhere any time soon. From February through August in 2023, the Financial Crimes Enforcement Network (FinCEN) received 15,417 reports related to mail theft-related check fraud amounting to nearly $700 million in suspicious activity. To combat this financial deceit, the Department of Treasury focused specifically on check fraud in its 2024 National Money Laundering Risk Assessment.
Anyone writing and/or accepting checks is vulnerable to check fraud. And there is no guarantee you’ll get your money back. Fraud can go undetected for weeks, and some banks will deny refunds if it's not reported within 30 days.
This blog features real examples of check fraud. Most importantly, however, it also explains how AR (accounts receivable) automation is the best way to avoid it.
Phi Dang works at her family’s B2B company that sells appliances to retailers. She received a call from a vendor who told her an invoice was past due.
Dang, however, remembered paying the bill on time. A quick check of the company’s bank account revealed the amount of the check - $14,000 – had cleared her account.
It revealed something far more sinister, too. Dang pulled up an image of the cashed check and noticed it was written in someone else’s handwriting.
Dang’s family and its business had been subjected to check washing. This form of check fraud occurs when a check is stolen in transit, chemically altered, and made out to a different payee and occasionally, a different amount.
Dang called her bank but was told she couldn’t get the money back because she hadn’t reported the check fraud within 30 days.
“He kept telling me, ‘Do you understand what I'm saying? Your money is gone, your money is gone,’’’ Dang said.
Marianne Mandel, who owns a small business in Chicago, wrote three checks to vendors totaling $700 - $375, $25, and $300. But the checks were stolen in transit and cost Mandel’s business more than 40 times that amount.
The checks, which Mandel said she brought directly to a post office, were chemically altered: from $375 to $9,375, $25 to $9,825, and $300 to $9,300.
The new total was $28,500, which the thieves cashed using BMO Bank’s mobile deposit app.
“We’re a small business. That is payroll,” Mandel told ABC7 in Chicago. “That is bills. That is rent.”
Mandel’s bank, Huntington, worked with BMO to try and get the money back. But Mandel told the network she received an email from BMO in September that the suspects had cleared their accounts and there were “no funds remaining to return.”
After BMO was contacted by ABC7, Mandel received an email: “A check has been ordered to satisfy this claim."
There is no word as to whether Mandel was refunded any of the $28,500.
Michael Christopher Rowser, a mail handler at the U.S. Postal Service’s Processing & Distribution Center in Birmingham, Ala., was convicted for participating in an online scheme involving stolen checks.
The Department of Justice said Rowser spent a year working with The Lucky Shop, which was operating on messaging app Telegram. The Lucky Shop received stolen checks from mail handlers, redacted them, and sold them online. Mail handlers like Rowser received a portion of the selling price.
Rowser received $106,000 working with The Lucky Shop. His sentencing is scheduled for April 7.
Bill360 eliminates the risk of check fraud by eliminating check usage and acceptance. Our AR automation platform, built specifically for small-to-medium B2B companies, makes it simple for customers to use self-service portals and pay you digitally through ACH (Automated Clearing House) and credit cards. These payment methods are far more secure than paper checks and faster too, providing you with quicker access to the cash needed to grow your business.
Bill360 also enables you to set up AutoPay and send invoice emails embedded with Pay Now links, making it simpler than ever for customers to pay you digitally.
If you want to learn more about check fraud, hear Nevada Gump, U.S. Dept. of Homeland Security, highlight the risks and impact of check fraud on B2B companies.
Dodge check fraud by ditching paper. Contact Bill360 today.