How to prevent check fraud: what businesses and banks do

In June 2025 the OCC, the Federal Reserve Board and the FDIC asked, as question 15 of their request for information on payments fraud, whether Regulation CC's exception for "reasonable cause to doubt the collectability" of a check lets a bank stop check fraud while depositors still get timely access to their money.

Check fraud is fraud on a paper check or its image: a stolen, washed, forged or counterfeit check turned into cash.

Who can act depends on where the check is. The business that issues it controls the check stock and the file it sends its bank. The bank of first deposit decides when the money becomes available, and the paying bank decides whether to pay at all. Each has its own fraud prevention controls on checks, and each control leaves a gap.

Why do checks still get hit by fraud in 2026?

A check carries what a criminal needs on its face, and US businesses still mail them. In AFP's January 2026 survey of 465 treasury practitioners, 58 percent said checks were subject to fraud in 2025, more than any other payment method. Of the organizations using checks, 72 percent plan to keep them, 68 percent of those citing vendor requirements (AFP, 14 April 2026).

From 2018 to 2021, the potentially fraudulent share of returned checks handled by the Reserve Banks rose from 10.2 percent to 15 percent (Federal Reserve Board, 9 December 2025). Suspicious activity reports on check, ACH and wire fraud rose 489 percent between 2014 and 2024, the agencies wrote. Reports of high volume mail theft rose 139 percent from 2020 to 2023. Since Project Safe Delivery began in May 2023, letter carrier robberies have fallen 57 percent to the end of fiscal 2025 (USPIS annual report).

Take one stolen check. It shows the payor's name, account number, routing number, address and signature, the Board notes, and the Fed warns that check data is sold or "used to perpetrate other types of fraud like identity fraud" (Federal Reserve, March 2026). Australia chose an end date: it stops issuing checks by 30 June 2028 and accepting them on 30 September 2029 (Australian Treasury).

Which common methods of check fraud does each control stop?

No single control stops every method, so Table 1 sets eleven of them against what each catches and what it misses.

Table 1. Check fraud controls by what they catch and miss

The Fed's resource for businesses lists four things criminals may try: alter the payee or amount, print counterfeits from stolen account details, forge the maker's signature, or steal a check and forge the endorsement on the back. USPIS adds scammers who print copies on copiers or scanners. Alteration meets gel ink and payee positive pay. Counterfeits meet security stock, the issued file and image analysis, and a forged maker signature meets signature analysis. A forged endorsement gets the least cover, since the Fed's list of what issued file matching helps prevent leaves it out. Kiting and paper hanging run on the fraudster's own accounts, so the banks' monitoring, not the issuer's controls, has to catch them.

What can a business do to prevent check fraud?

Most of the work is housekeeping around blank checks and around the file the bank gets for every check issued. The items come from the Fed's resource for businesses and the OCC's guide.

1. Check inventory. Lock check stock away and let few people reach it, because counterfeits are sometimes printed on stolen check stock.
2. Anti fraud checks. Order security stock with microprinting and watermarks, and print in a consistent font that is harder to duplicate.
3. Dual control. A second approver and separate people to issue, sign and reconcile stop one insider from writing and hiding a check alone, the pattern of employee fraud on checks.
4. Online banking. "Reconcile bank accounts daily" and watch transactions online, so an item you never issued shows within a day.
5. Positive pay. Send the bank a daily issued file with payees, or use reverse positive pay, where the bank sends the presented file and "The company compares the information with its internal records" (OCC guide). Payee names come from the vendor master, so know your supplier checks keep a false payee out of the file.
6. Secure disposal. Destroy checks from closed or dormant accounts, which the OCC names as the opening for closed account fraud.
7. Mailing. The Fed's advice is to avoid leaving outgoing checks "in public places, such as unmonitored mailboxes"; the washing controls below cover the rest.
8. Electronic payment. The Fed says "Consider alternative payment methods", so move every vendor that accepts it off checks.
9. Training. Teach staff to spot fraudulent and duplicate checks and how to respond.

How do you prevent check washing?

Make the ink hard to lift and the envelope hard to read. The technique USPIS describes is chemical: checks stolen from mailboxes are washed to remove the ink, and the payee and often the amount are rewritten. Write with gel ink, which the Fed calls "more difficult to wash off", and mail checks in security envelopes. USPIS asks senders to drop outgoing mail in blue collection boxes "before the last pickup or at your local Post Office" and never to leave mail in a mailbox overnight.

How do you write a fraud proof check?

Leave no room to add anything. The OCC's guide shows a $69.99 check, written to the far right of both amount lines, turned into $969.99 by adding "9" and "Nine Hundred" in the blank space in front. The Fed's advice is to fill in checks properly, "not leaving blank spaces".

What should the bank of first deposit check before it releases funds?

The depositing bank checks who opened the account, whether the deposit fits it, and how long the funds can wait. The Fed's people, processes and technology guide starts at account opening, with KYC backed by identity verification, document validation and risk scoring. Deposits above "dollar, velocity or other risk thresholds" may go to manual review or delayed availability. Duplicate detection looks for checks deposited "multiple times across different channels", and tiered availability can hold funds from new accounts and high risk deposits longer.

Picture an illustrative $2,400 local check deposited at a branch. In an account opened two years ago, Regulation CC makes $275 available the next business day (up from $225 since 1 July 2025, Board and CFPB) and $2,125 by the second business day. If facts give the bank reasonable cause to believe the check will not be paid, Regulation CC treats up to five more business days as a reasonable wait, and the notice must state the reason. In an account opened 20 days ago, new for its first 30 calendar days, the schedule does not apply and the bank's policy sets the hold.

New accounts are where washed checks land. In a USPIS case, organizers recruited people on social media to open bank accounts or lend their own, then deposited altered checks stolen from the mail at major banks. The California Attorney General's Office charged over eighty people, and 56 were arrested on 6 and 7 October 2022, with nearly five million dollars allegedly taken from hundreds of victims (USPIS). Recruits who lend an account this way are money mules.

The money then has to leave the mule's account. When it leaves by transfer, complead, formerly Sanction Scanner, can act: its bank transactions monitoring scores every account transfer, sent or received, before it is executed, and flags an account that takes in money from several unrelated senders and passes it straight on. Each score maps to an action the bank defines, from a warning to the sender to a hold or a block, and the record names the rule and the user behind each decision.

Why do banks put holds on checks?

A hold lets a bad check come back unpaid before the money is gone. Under 12 CFR 229.13(e), doubt about a check needs facts a reasonable person would rely on, and it "shall not be based on the fact that the check is of a particular class or is deposited by a particular class of persons". H.R. 9331, a House bill reported in September 2026, would allow holds of up to 10 days, extendable to 45, while a bank decides whether it has "reasonable suspicion" of fraud. The bill is not law.

How does a bank identify a fake check at deposit?

Look at six places: the MICR line, the routing number, the check number, the edges of unusual personal checks, signs of overwriting and an unknown drawee bank. The check fraud entry explains each tell with its source. When a deposit fails that inspection, a joint statement by FinCEN and four agencies of 2 September 2026 says the bank may tell the customer it rejected the deposit because of suspected fraud, for example an altered or counterfeit check, and may ask about the source of funds. It must not reveal a suspicious activity report or whether one exists.

How does the paying bank stop altered and counterfeit checks?

In a case the Fed describes, several checks over $20,000 on one customer's account were presented within a day by different institutions. The paying bank's platform flagged them because "the check numbers were out of range, the amounts exceeded the average amount of other checks issued, and there was no history of payments to the payees". An analyst saw that the signature differed from the customer's, the customer confirmed the checks were not issued, and the bank returned them (Fed paying bank guide).

At presentment the paying bank typically has limited visibility into the deposit behind a check, the Fed notes, so it works from what the customer issued and how the account behaves. The Fed calls issued file matching a solution that "adds another layer of protection". The file, typically sent daily, holds each check's serial number, amount and often the payee. It helps stop stolen checks with forged signatures and unauthorized remotely created checks, but alterations and counterfeits only "if the payee can be validated".

AI and machine learning can read millions of data points for anomalies in serial numbers, payees and amounts. The Fed notes they can also approve "known valid items", so fewer reach manual review, while flagged items go to a fraud analyst, who decides. Joining check data with ACH, wire, instant payment and card activity, plus consortium data, shows cross channel patterns sooner.

On sharing under section 314(b), FinCEN's mail theft alert of 27 February 2023 says "FinCEN strongly encourages such voluntary information sharing", and the Fed says sharing helps stop schemes "repeated across institutions", the pattern of organized fraud against a financial institution.

How do paying banks catch check forgery?

They score the image. Image analysis and signature verification estimate how likely an image or a signature is to be valid, and the Fed says a bank may pass items with a high probability of being legitimate on history and image. The weak point is the input: such technology "depends upon timely, accurate data", integration and ongoing support.

What changed in check fraud prevention since 2025?

Nine dated steps since March 2025 changed the federal check, the hold rules and the mailbox. Table 2 gives the status of each.

Table 2. Check fraud prevention changes since 2025 (status on 30 October 2026)

For a business, the federal government is leaving paper. Executive Order 14247 applies "Effective September 30, 2025, and to the extent permitted by law" and says Treasury checks have historically been "16 times more likely" than an electronic transfer to be reported lost, stolen, undeliverable or altered. Treasury still printed 40.9 million checks in fiscal 2025, and its rule on the exceptions is still a proposal.

Back to question 15. The joint statement took up what commenters on the agencies' request asked about telling a customer, and it sets no hold period. The committee's 10 and 45 day holds are still a bill. So a bank that holds a check today for reasonable cause needs facts about that check, and its notice to the depositor has to state the reason.

Sources and review. Onur Taner read every figure, date and quote at its source on 30 October 2026: the Federal Reserve's four check fraud guides, Regulation CC as of 28 October 2026, the agencies' 2025 request and 2026 joint statement, H.R. 9331 as reported, Executive Order 14247 and the Fiscal Service proposal, AFP's 2026 release, the USPIS report for fiscal 2025 and the OCC's 1999 guide. Javid Khasayev fact checked the page.