Check Fraud Is Surging
Here’s How Businesses Can Protect Themselves
By Heather Arbour
In an era dominated by digital payments, it’s easy to assume that check fraud is a relic of the past. But the reality is far more alarming: check fraud is not only alive, but it’s thriving, and it’s evolving to span both physical and digital realms.
As someone who has spent more than two decades in banking compliance and fraud prevention, I have seen the damage firsthand. Check fraud isn’t just inconvenient — it can be devastating.
At Monson Savings Bank, we’ve helped business customers who faced losing tens of thousands of dollars in a single incident. And what’s most frustrating is that many of these losses are preventable with the right tools and awareness.
Heather Arbour
“Fraudsters aren’t just individuals — they’re organized networks. They use social media and encrypted messaging apps to share techniques and sell stolen check images. It’s a whole underground economy.”
The Mechanics of Check Fraud
Check fraud is no longer confined to forged signatures and stolen paper checks; it has evolved into a complex, tech-enabled threat. Criminals are using both traditional tactics and digital tools to exploit vulnerabilities in business payment systems.
Classic forms of check fraud include forged signatures, altered payee names, counterfeit checks, and check washing, where stolen checks are chemically altered and rewritten. These methods remain prevalent, especially when checks are sent through unsecured mail channels.
Fraudsters aren’t just individuals — they’re organized networks. They use social media and encrypted messaging apps to share techniques and sell stolen check images. It’s a whole underground economy.
Digital check fraud is also on the rise, and it’s often harder to detect. Fraudsters are increasingly using mobile banking apps to commit remote deposit capture fraud, depositing the same check multiple times across different platforms. Synthetic identity fraud is another growing concern, where criminals create fake personas using a mix of real and fabricated data to open accounts and deposit counterfeit checks. Business email compromise schemes are also becoming more common, with scammers impersonating vendors or executives to reroute legitimate payments.
In fact, we’re seeing just as many cases involving digital manipulation as we are with physical theft. Fraud is a risk whether it involves traditional paper checks or digital deposits. This evolving landscape demands that businesses stay informed and proactive. Understanding the full spectrum of fraud tactics is the first step toward building effective defenses.
Integrating Critical Lines of Fraud Defense and Loss Mitigation
Fraud detection solutions are crucial. There are few as effective and proactive as positive pay when it comes to protecting against check fraud. Whether fraudsters are targeting traditional paper checks or digital deposit channels, positive pay offers businesses a critical line of defense.
This service allows businesses to submit a list of issued checks to their bank. When a check is presented for payment, the bank compares it against the list. If there’s a mismatch in amount, check number, or payee, the transaction is flagged for review.
Positive pay is like having a second set of eyes on every check. It’s proactive, not reactive. You’re catching fraud before the money leaves your account and potentially saving yourself from major losses. We strongly encourage our business customers to implement positive pay at Monson Savings Bank.
“As fraudsters continue to innovate, businesses must stay vigilant. The rise of AI-generated synthetic identities and deepfakes means that fraud will only become harder to detect.”
Why Businesses Should Act Now
The urgency to adopt fraud mitigation tools has never been greater. According to industry data, check fraud attempts have increased by more than 40% in the past year, with small and mid-sized businesses being disproportionately affected.
Many business owners think, ‘it won’t happen to me’ — until it does. And by then, it’s often too late to recover the funds.
Beyond Technology: Building a Culture of Vigilance
While tools like positive pay are essential in the fight against check fraud, that technology alone isn’t enough. Businesses must adopt a multi-layered approach that includes strong internal controls, employee education, and daily operational vigilance.
Daily reconciliation of accounts is critical to catching anomalies early, before they escalate into major losses. Employees should be trained to recognize red flags, such as suspicious payment requests or unexpected changes in vendor information, and empowered to question anything that seems off.
Verifying vendor payment instructions through a secondary channel can prevent business email compromise scams, and secure mailing practices, like using locked mailboxes or dropping checks directly at the post office, can help reduce the risk of physical check theft.
Fraud prevention isn’t just about tools; it’s about culture. Everyone in the organization needs to be part of the defense. Train your staff to recognize red flags. Reconcile accounts daily. Limit who can issue checks and who can approve payments. Fraud prevention is a mindset.
Monson Savings Bank offers a comprehensive Business Security Center on its website. This resource hub provides curated information on fraud prevention strategies, scam recognition, cybersecurity best practices, and secure operations. Whether you’re a small business or a growing enterprise, the Business Security Center is designed to help you stay ahead of threats and build a resilient, fraud-resistant organization.
Looking Ahead
As fraudsters continue to innovate, businesses must stay vigilant. The rise of AI-generated synthetic identities and deepfakes means that fraud will only become harder to detect.
If fraudsters are evolving, then so must we. The bottom line is that the cost of prevention is always less than the cost of recovery. As a local community bank, we are happy to help our customers be successful, and that includes offering solutions to help them stay one step ahead and reduce risk of harmful financial loss.
Heather Arbour is vice president, BSA/Fraud officer and Compliance manager at Monson Savings Bank.
