Check fraud has nearly doubled amid a surge in organized mail crime that started during the COVID-19 pandemic, and experts say it could spell the end for the once-popular payment method.
The number of check scams banks reported to the Treasury Department’s Financial Crimes Enforcement Network soared from 350,000 in 2021 to 680,000 last year, even as check use continued a 30-year slide. The agency, known as FinCEN, estimates check fraud cost victims $24 billion in 2022.
Most incidents arose from thieves taking mail out of commercial bins, residential mailboxes and even U.S. Blue Bin receptacles where individuals or small businesses had placed checks in stamped envelopes to pay their bills. Others came from gangs of young thieves robbing letter carriers, often at knifepoint or gunpoint, to get the “arrow” keys that open postal boxes throughout a metropolitan area.
The U.S. Postal Inspection Service received about 300,000 complaints of mail theft in 2021, more than double the 2020 tally. Last month, the U.S. Postal Service reported that 305 letter carriers were robbed on the job in the first half of fiscal 2023, which ended March 31, putting direct thefts on track to be more than double the 412 reported in all of fiscal 2022.
Bank investigators say those statistics show that checks have become the riskiest way of paying bills in the digital age, even though many older adults still believe otherwise.
“Checks are probably going to be phased out as the next generations grow up without using them,” said Mark D. Solomon, a vice president of the International Association of Financial Crimes Investigators, a California-based nonprofit. “Financial institutions and retailers have become very suspicious of them because of how much fraud there is right now.”
Improved verification methods and EMV chip card technology, instead of the magnetic stripe, have made it harder for criminals to counterfeit debit and credit cards or get more than a few dollars from stolen cards, said Mr. Solomon, who has spent years investigating financial crimes for banks.
He said that draws criminals back to the ease of “washing” checks with household chemicals, rewriting them to pay more, counterfeiting checkbooks and using or selling the banking and routing numbers.
“Seniors think checks are a safe way to pay bills, but there are much safer ways of conducting transactions right now,” Mr. Solomon told The Washington Times. “Checks are more vulnerable than other payment methods to being compromised, counterfeited or stolen.”
Reports of check fraud grew early in the pandemic as criminal gangs formed to target government relief checks. As the COVID stimulus ended, fraudsters started stealing more bill payments from individuals and small businesses.
Criminal rings also have become bolder about stealing the financial identity of check fraud victims, according to the banking industry.
Many criminal gang leaders now train “mules” to talk persuasively to bank tellers as they create fake identities or businesses, opening new lines of credit based on old account information sold on the dark web. They then use the new debit cards and PINs to drain more money from a victim.
Investigators say the crime rings recruit homeless and financially strapped individuals as members on social media. In one case in Southern California last year, nearly 60 alleged gang members were arrested and charged with committing more than $5 million in check fraud against 750 victims.
Check use has declined steadily since 1992 as more adults have switched from cash and checks to credit and debit cards for most purchases. Today, they are primarily used to pay bills.
Consumers wrote nearly 3.4 billion checks last year, down from more than 19 billion checks in 1992, according to data from the Federal Reserve. But the average check amount rose from $695 to $2,652 over the same period — about $1,000 more per check than three decades ago, adjusted for inflation.
That makes scammers likelier to make money from fake checks than by stealing electronic payment information or cards.
According to investigators, thieves spend small amounts on stolen credit cards to avoid detection and usually get stopped after the bank calls cardholders to verify the transactions.
By comparison, fraudsters can rewrite a $20 check for $5,000 without a bank having any way of knowing what the check should look like. With checks they cannot wash, fraudsters use the banking and routing numbers to print counterfeits.
While mobile phone deposit applications mean the thieves never have to look a bank teller in the eye, others create fake IDs to make in-person deposits.
The difficulty of catching the scams shows the need for banks and retailers to move away from accepting checks, said John Berlau, director of finance policy for the libertarian Competitive Enterprise Institute
“These new problems with checks show the importance of secure debit and credit cards for consumers and retailers,” Mr. Berlau said in an email.
The American Bankers Association recommends using pens with “indelible black ink” that is harder to wash, verifying deposits with check recipients and reviewing bank statements online to protect transactions.
The association also urges victims to report suspected fraud to the U.S. Postal Service and their banks.
“Working together as an industry, alongside law enforcement, the Postal Service and regulators, offers us the best chance at success,” Sarah Grano, a spokesperson for the American Bankers Association, told The Times.
The safest way of making a payment by check is to drop it off in person at a local post office or just before closing hours, and never leave it in a postal box overnight, according to USPS.
Postal inspectors say they are seeing more organization and coordination of check fraud than ever before as criminal rings share data through encrypted messaging and restricted content on the dark web.
Last month, the postal service announced several new security measures to protect checks in the mail. The measures include installing 12,000 high-security blue collection boxes in high-risk areas nationwide and replacing 49,000 arrow locks on postal boxes with electronic locks.
“Generally, crime has increased since the start of the pandemic, our carriers are in neighborhoods delivering to 160 million delivery points daily, six days a week, and sometimes are in the wrong place at the wrong time,” U.S. Postal Inspector Michael Martel, national spokesman for the Postal Inspection Service, said Tuesday.
• Sean Salai can be reached at ssalai@washingtontimes.com.
Please read our comment policy before commenting.