Help protect your small business from check washing fraud

Check washing is the #1 type of check fraud as reported from a recent survey of small businesses by Cornerstone Advisors.^{Disclosure 1} Criminals are attracted to checks—businesses report that the highest incidence of payment fraud comes from checks.^{Disclosure 2} While the usage of checks is dropping,^{Disclosure 3} the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury has noted a nationwide surge in check fraud schemes targeting the U.S. Mail.^{Disclosure 4}

Check washing scams are on the rise.

Check fraud typically starts with criminals exploiting vulnerabilities in the mail system—for example at mail deposit locations, the sorting facility, or at the point of delivery. With a check in hand, check washing is a simple, straightforward process. Solvents are used to “wash away” the payee’s name and, in some cases, the original dollar amount of the check. With a blank check, criminals enter a new payee name and dollar amount to steal funds from a business checking account. Criminals may also make copies of the checks to use themselves or to sell to other

Whether they make copies or simply commit theft using the initial stolen check, the fraud perpetrators wind up in possession of one or more checks that appear authentic, are from legitimate businesses and drawn from genuine bank accounts.

The ease of committing check washing is one reason for this crime’s fast growth. Banks issued about 680,000 Suspicious Activity Reports related to check fraud in 2022, many of them stemming from check washing incidents. That’s nearly twice the number filed in 2021, a year that saw a 23% increase over similar reports in 2020.^{Disclosure 4} Frank McKenna, chief fraud strategist at Point Predictive, says, "I think check fraud is going to hit $24 billion or more this year. This will be a 50% increase from the last time it was measured in 2018.”^{Disclosure 5}

Small businesses take a hard hit.

Small businesses are seeing the risk of check fraud scams, with:

• 47% of businesses surveyed by Cornerstone Advisors, say check fraud is a big concern.^{Disclosure 1}
• 65% of those experiencing check fraud in the past 12 months were faced with a check fraud of greater than $50,000.^{Disclosure 1}
• 67% cite check washing as the fraud method used.^{Disclosure 1}

“Tampering with physical checks is one of the most common ways criminals commit fraud against small businesses, in part because they’re generally softer targets,” said Scott Stearsman, head of Small Business for Truist. “Unlike large organizations with plentiful resources and staff, small business owners often possess relatively little in the way of tools and training that could help them effectively prevent fraud.”

Small businesses do have what criminals want—business bank accounts. These coveted targets generally have more funds to cover fraudulent checks than individual accounts. Plus, more thinly resourced, smaller organizations can take longer to discover check washing fraud, offering an added incentive for bad actors.

How to minimize the risk of check washing.

“Unfortunately, there’s no way to completely eliminate the risk of fraud against your business,” said Stearsman. “But you can minimize your risk of check washing by opting for safer payment methods and following security best practices when you do write checks.”

Replace mailing checks with electronic forms of payment.

When it’s time to pay bills and make purchases, you have many options. Use electronic forms of payment when possible—according to the Association for Financial Professionals (AFP), organizations report a lower frequency of fraud with credit cards, ACH transfers, and mobile wallets compared to checks.^{Disclosure 2}

Instead of sending a check, consider these options:

• Business credit cards provide flexibility, and today’s cards come with EMV chips that encrypt transmitted information.
• Zelle® ^{Disclosure 6}, Venmo, PayPal, Apple Pay® and other mobile payment apps are accepted by an increasing number of businesses and service providers.
• Your Truist mobile app allows you to pay bills and vendors, track due dates, and set up email reminders and alerts.
• ACH Services are fast, making it ideal for repeating payments and larger, one-time funding needs.
• Your bank’s online bill pay service offers a simple method to pay routine expenses.

Focus on safety when you write checks.

For some businesses, writing checks may be unavoidable. If that’s true for your company, these tips make it harder for criminals to hijack your checks and gain access to your funds:

• Choose a pen with indelible or permanent black ink that can’t be removed through check washing.
• Give outgoing mail to your letter carrier or drop it off inside your local post office to reduce vulnerability to mail theft. Criminals often hunt for checks by stealing outgoing mail from collection points and blue postal boxes.
• Use Fraud Inspector™ offered by Truist Small Business Banking to review transactions that cleared the previous day and initiate the return of any suspected fraudulent items.
• Shred all cancelled checks as soon as you’ve reconciled statements. Stolen checks pose a fraud risk whether they’re taken from your office or as they’re making their way through the mailing and delivery process.

Keep your business secure and strong.

Check washing is one of many threats that require vigilance from small businesses. Our teammates are ready to support you with advice to help you keep your business secure. Set up in-person or virtual appointment or call 877-279-3083 to speak with a Small Business consultant to learn how we can help your business.