We are constantly bombarded with stories of online fraud. Websites hacked. Sensitive information stolen.
So it would seem that dropping a check in the mail and paying the old-fashioned way is the safest bet.
Sadly, it is not.
Check fraud is rampant right now — and the current method of defrauding victims is called “check washing.” It happens to individuals, too, but businesses are being hit especially hard. They’re targeted because businesses are more likely to mail checks on a regular basis. They’re also less likely to pick up on the fraud right away.
At E.L. Sanders, we know all about this because we have recently been victimized. And so have our clients.
If the fraud is caught in time, the business’ bank is usually able to rectify the situation. When it cannot, that’s when the right insurance policy can save a business thousands of dollars.
What is Check Washing?
Check washing is the most common method of check fraud happening today. Businesses are victimized when the physical checks they’ve mailed are intercepted in transit.
The criminals then physically alter the checks, changing the recipient’s name as well as the amount of money the check is made out for.
In our case, we mailed a check to a recipient in Baltimore for a payment of $1,600. After some time had passed, the intended recipient let us know that the check never arrived. To be safe, we put a “stop payment” on the check through our bank.
Yet a short time later, our bank reached out and let us know that an unusual amount of money had come out of our checking account. A total of $9,000 was gone.
Upon further inspection, we realized that the $1,600 check bound for Baltimore had mysteriously been cashed in Florida, payable to a different recipient and for $9,000.
“Fortunately, the bank noticed and called us,” said Chief Financial Officer and Agent Sara Payne. “But a lot of clients don’t catch it right away. The checks are going through, and it can create a big problem.”
That was the case recently with a business client who let us know that several thousand dollars had disappeared from his checking account. His bank hadn’t noticed, and neither had he until more than a month had passed.
He was worried that he’d never get the money back. Sara pulled up his policy and advised the client of his insurance coverage.
“Sir, you have crime coverage and $25K in check forgery and alteration coverage,” she told him. “If the bank can’t recover it, call us back and let us know. We can file a claim.”
Fortunately, the client was able to correct the situation through his bank and his money was returned. That’s not always the case.
Because he had the right coverage in place, he was safe either way.
Check forgery and alteration coverage can be included in a variety of business-related insurance plans. And given the current trend, it’s coverage that we always highly recommend.
How to Avoid Check Fraud
Though E.L. Sanders Insurance Agency was able to get our money returned to our bank account, we still reported the check washing incident to police. A crime had still been committed.
The La Plata Police Department told us that his department has seen several local businesses victimized by check washing. Our local bank told us the same.
Here are some easy tips to reduce the likelihood of your check being intercepted and washed.
First, never mail checks in envelopes with clear plastic windows. It’s often a giveaway that the envelope contains a check. Criminals will flag those envelopes immediately. When you must mail a check, it’s wise to send the check in a standard envelope with no indication of what’s inside.
To help throw off the would-be criminals, write the recipient’s address and the return address on the envelope by hand. While it may seem less professional, that’s precisely the point. Criminals are far less likely to suspect that a check is inside an envelope that is addressed by hand.
Also, if you’re mailing checks, it’s a good idea to monitor your bank account and confirm with with the intended recipient that that your check has made it to the correct destination.
Finally, if you are a victim of check fraud, always report the crime. This is important, even if — as in our case and our client’s — the issue is resolved by the bank.
Law enforcement cannot solve crimes until they are aware of them. And because check fraud is happening across state lines, local law enforcement can even collaborate with federal authorities to help find those committing these crimes.