To the typical consumer, a paper check might seem like an outdated form of payment. But while check use may be on the decline with the general public, to fraudsters, checks are alive and well. Even in 2025, check fraud is one of the most pressing issues facing financial institutions – so what exactly is it? And more importantly, how can FIs combat it?
What is check fraud?
Check fraud refers to any illicit manipulation of a check, typically for the purposes of financial gain. For example, a fraudster might steal a check from the mail and forge the account holder's signature to cash it, or alter the details on a check to change the amount or the payee.
Check fraud may be perpetrated by the fraudster themselves (as in the above examples), but they may also implicate unsuspecting third parties via a variety of fake check scams. Typically in these scams, the fraudster will ask the victim to do something such as withdraw money to buy gift cards, and send a check they can deposit to cover the cost. By the time the bank discovers the check is fake, the money is gone and the fraudster has vanished with the (for example) gift cards.
Check fraud represents a significant problem for financial institutions (FI) because if (for example) a fraudster deposits or cashes a manipulated check, the FI is typically liable for the resulting losses unless they can prove the depositor intended to commit fraud. In the case of the above scam, for example, the bank that initially accepted the fake check would likely be on the hook for any losses because their customer, the depositor, wasn't aware they were committing fraud.
Check fraud vs. ACH fraud
ACH fraud is a form of financial fraud that uses the Automated Clearing House (ACH) electronic network.
ACH fraud is distinct from check fraud, but the two are related because to perpetrate ACH fraud, a fraudster needs two key pieces of information: a bank account number and that bank's routing number. Both of these numbers can be obtained from stolen paper checks, although fraudsters may also acquire them via other means such as scams or data breaches.
How widespread is check fraud?
According to the 2024 Association of Financial Professionals survey, check fraud is the most common type of payments fraud, with 65% of survey respondents – finance and treasury professionals with job titles such as Vice President of Treasury – reporting their organizations had encountered check fraud in the past year.
A similar survey conducted by the Federal Reserve in 2023 also found that check fraud was on the rise, with respondents reporting a 7% YoY jump in check fraud attempts, a 12% jump in losses, and that overall, check fraud accounted for 31% of their total yearly fraud losses (with ACH fraud accounting for an additional 10%).
Check fraud can be extremely costly for FIs. In 2024, FinCEN reported that in a six-month period, there were 15,417 reports from financial institutions of mail-theft-related check fraud in the US affecting a total of about $688 million. Mail-theft-related check fraud is just one of many types of check fraud, and not all instances of check fraud are discovered or reported.
Types of check fraud
There are a wide variety of ways that fraudsters can commit check fraud. Some are forms of first-party fraud (the fraudster directly commits the fraud) and some are scams (the fraudster gets an unwilling victim to participate in the fraud).
Below, we've listed some of the most common types of check fraud. Note that this list is not exhaustive, and that many instances of check fraud can involve combining several of the MOs described below:
Check theft involves stealing a check and forging some element of it – for example, forging a signature on the back of the check and cashing it.
Check cooking and check baking are fraudster slang terms for altering a check or creating a new one using information from real stolen checks.
Check forgery, which is sometimes combined with check theft, involves forging fake checks, generally with the fraudster's own name as the payee.
Check kiting involves writing a bad check from one bank account to another, and then withdrawing the balance from the second account before the bank realizes the check was fraudulent.
Paper hanging is intentionally writing bad checks; for example, paying with a check from an account that is closed or that the fraudster knows doesn't contain enough to cover the check.
Check floating is any kind of fraud that takes advantage of the "float" time between when a check's value is added to the available balance of an account and when the bank actually processes the check (at which point they will discover it is bad and remove the check's value from the available balance). This "float" period is typically a couple of days, during which the fraudster could withdraw the cash, or write another check from the recipient account to extend the float period for a few more days.
IDT check theft describes when a fraudster steals someone's identity, opens a bank account in their name, and uses that account to write bad checks. A variation of this is account takeover, in which the fraudster takes over a person's existing account and writes bad checks from that (among other potential crimes).
Check washing is a form of check forgery that involves fraudsters using chemicals to "wash" information off a check, allowing them to then add their own information. For example, they might wash and then replace the payee name and/or amount.
There are also a wide variety of check scams, in which checks are used to take financial advantage of unsuspecting third parties. For example, a fraudster may offer the victim a fake job, and instruct them to make a wire transfer from their personal account to another account, promising to send a check that covers the transfer plus some additional money as the victim's payment. The check posts to the victim's account balance and the victim transfers the money. After a few days the float period ends, the check bounces, the fraudster and their "job" disappear, and the victim has lost whatever sum they transferred.
It's worth mentioning that while all of the above are examples of fraud, check fraud is not always malicious, nor does it always result in losses for FIs. For example, check floating is sometimes used to cover gaps between when a person has bills due and when their paycheck is posted – although they're knowingly writing checks their account cannot cover, there's no loss, as ultimately their paycheck is deposited to cover the check's value.
How FIs can protect themselves against check fraud
One of the reasons check fraud is so prevalent is that industry solutions for addressing it are not as mature as the solutions available for other types of fraud such as identity theft. In part, this is an issue of insufficient – and insufficiently accurate – data. As we wrote in an earlier blog post on check fraud:
"Checking account screening companies, who are in the best position to offer data that could serve as the basis for such solutions, lack universal coverage and are highly susceptible to accuracy problems, particularly in cases of fraud. [Source]"
However, SentiLink's research into this problem with the help of our partners has determined that it is possible to identify individuals who have an elevated risk of committing check fraud by looking at predictive signals in their history. Ties to likely-fraudulent PPP loans, a high velocity of checking account applications, and a history of synthetic fraud are all signals that can predict check fraud – in labeled data from our partners, these signals flagged 28% of their check fraud losses.
The challenge for FIs is that they typically don't have access to enough of the fraudster's history. For example, an applicant with a high velocity of DDA applications may not appear high-velocity to a bank if the previous applications have been to different banks. Companies like EWS and Chex Systems have products that can address this, but they don't have coverage of many of the fintech companies where fraud risk is often the highest. SentiLink works with 400+ partners, including 10 of the top 15 banks and 6 of the top 10 credit unions, and 50+ fintech unicorns, allowing partners to drink from a much deeper well of historical knowledge about the applicant.
Book a demo today and find out how SentiLink can help your company reduce losses from check fraud by identifying more fraudsters at the point of application.
Plus, check out our free Treasury Check Verification Service to identity stolen and fraudulent U.S. Treasury checks.
