While digital payments continue to grow, many businesses still rely on paper checks to pay vendors, contractors, suppliers, landlords, and other service providers. Because checks are still widely used, they remain a common target for fraud.

Check fraud can involve stolen mail, altered payment amounts, changed payee names, forged signatures, or counterfeit checks. These issues can lead to financial losses, missed payments, accounting problems, and time spent reviewing account activity.

Mail theft is an important part of the problem. The FBI and U.S. Postal Inspection Service have warned that criminals steal mailed checks, alter legitimate checks, create counterfeits, and use forged endorsements to redirect funds.

Understanding how these schemes work can help your business strengthen its check-handling and account-review procedures.

What Is Check Fraud?

Check fraud occurs when someone steals, alters, counterfeits, forges, or improperly uses a check to access money from a bank account.

Business check fraud can involve:

  • Changing the amount on a check
  • Altering the payee’s name
  • Forging a signature or endorsement
  • Creating counterfeit checks
  • Stealing checks from the mail
  • Using account information obtained from a legitimate check

Any business that sends or receives checks can be affected. While larger organizations often have dedicated fraud controls, small businesses may have fewer people reviewing issued checks and account activity, making routine account monitoring and clear approval procedures especially important.

Why Checks Remain a Target

Checks contain account information and may pass through several hands before reaching their destination.

A business check typically includes:

  • A routing number
  • An account number
  • The business’s name
  • An authorized signature

When checks are mailed, left in unsecured mailboxes, or handled by several people, they may be exposed to theft or misuse.

For a small business, the impact can go beyond the check amount. Fraud can interrupt vendor relationships, delay payments, create accounting issues, and require time to investigate and correct records that could be spent serving customers and growing the business.

How Check Washing Works

Check washing is a form of fraud in which someone removes or changes information on a legitimate check and replaces it with different payment details.

The scheme can be difficult to spot because it begins with a real check issued by the business. The FBI describes check washing as chemically altering a check, typically to change the original payee, amount, or both.

A typical scheme may look like this:

  1. A fraudster gets hold of a mailed check.
  2. The intended recipient’s name, payment amount, or both are removed.
  3. New payment information is added.
  4. The altered check is deposited or cashed.

For example, a check written to a legitimate supplier for $200 could be altered to a much larger amount and made payable to someone entirely different.

The business may not discover the problem until reviewing its account activity or hearing from the vendor that the payment never arrived.

Ways to Reduce the Risk of Check Washing

  • Fill out every field completely.
  • Avoid leaving empty spaces around the payee name or amount.
  • Deposit outgoing mail before the final scheduled pickup or take it directly to the post office.
  • Don’t leave incoming or outgoing mail unattended overnight.
  • Review account activity regularly.

The U.S. Postal Inspection Service also advises retrieving mail frequently and avoiding leaving mail in a mailbox overnight.

Mail Theft and Stolen Business Checks

Not every check fraud scheme starts at a computer. Sometimes it starts with a mailbox.

Outgoing checks left for pickup and incoming checks sitting unattended can attract thieves. Once someone has a check, they may try to alter it, create a counterfeit copy, forge an endorsement, or misuse the account information it contains.

Businesses that mail checks should limit how long they remain unattended. Take important payments directly to the post office when possible, retrieve incoming mail promptly, secure blank check stock, and follow up when an expected payment doesn’t arrive.

These precautions don’t eliminate every risk, but they can reduce the time checks spend unattended or in unsecured locations.

Businesses affected by mail theft can review the U.S. Postal Inspection Service’s check-washing guidance for reporting information and additional mailing recommendations.

Other Business Check Fraud Schemes

Fraud doesn’t stop with check washing. Business owners should be aware of several other schemes involving checks and the information printed on them.

Counterfeit and Digitally Altered Checks

Fraudsters may use stolen account information to create counterfeit checks that appear to come from a legitimate business.

The FBI also warns about “check cooking,” which involves digitally altering an image of a stolen check and using it to manufacture additional checks.

Forged Signatures or Endorsements

A forged signature may make it appear that a payment was properly authorized. A forged endorsement can also be used to deposit a stolen check without the intended recipient’s permission.

Altered Payees

Instead of changing the amount, a fraudster may change the name of the person or company receiving the payment. Funds intended for a legitimate vendor can then be redirected.

Misuse of Business Account Information

A stolen check exposes account and routing numbers that may create concerns beyond the original payment. Business owners should take unusual check or account activity seriously and report concerns promptly through a trusted bank contact.

Warning Signs to Watch

Missing checks, payments that don’t reach vendors, and check amounts that don’t match internal records can all indicate possible fraud.

Use this checklist to help spot possible issues:

  • Checks missing from inventory
  • Payments made to unfamiliar recipients
  • Duplicate check numbers
  • Checks clearing for unexpected amounts
  • Vendors reporting that mailed payments never arrived
  • Unexplained withdrawals or balance changes
  • Suspicious account activity involving check information

If an item doesn’t match your records, contact the bank promptly and review other recent account activity.

Check Fraud Prevention Steps for Small Businesses

Businesses can reduce check fraud risk by reviewing accounts regularly, strengthening internal controls, securing checks, using fraud prevention tools, and considering electronic payment options.

No single tool can prevent every type of fraud. Businesses should use multiple safeguards that fit their payment processes and assign clear responsibilities to employees.

1. Review Cleared Checks and Account Activity

Don’t wait until the end of the month to compare cleared checks with your internal records.

Frequent reviews can help your business identify:

  • Unauthorized checks
  • Duplicate payments
  • Suspicious withdrawals
  • Unrecognized check numbers or recipients
  • Payments that cleared for unexpected amounts

Reviewing activity through business online banking can make it easier to compare recent transactions with checks your business has issued.

If a check number, recipient, or amount doesn’t match your records, contact the bank through a trusted phone number.

2. Establish Clear Internal Controls

Whenever possible, divide financial responsibilities among multiple employees.

For example:

  • One employee prepares payments.
  • Another approves them.
  • A different employee reconciles the account.

Separating payment preparation, approval, and account reconciliation can make it harder for a mistake or unauthorized action to go unnoticed.

3. Secure Checks and Financial Records

Blank checks, signature stamps, banking records, and account information should be stored securely.

Access should be assigned according to each employee’s responsibilities and reviewed when an employee changes roles or leaves the business.

4. Ask About Positive Pay

Positive Pay compares checks presented for payment with a list of authorized checks provided by the business. Checks that don’t match may be rejected or flagged for review.

Businesses that regularly issue paper checks can speak with PB&T’s business banking team about how Positive Pay works and whether it fits their payment process.

5. Strengthen Mailing Procedures

Review how checks move in and out of your business.

Questions worth asking include:

  • Who has access to outgoing checks?
  • Where are checks stored before mailing?
  • How quickly is incoming mail collected?
  • Are mailed payments tracked or followed up on?
  • Who responds when a vendor reports a missing payment?

Small procedural changes can reduce unnecessary exposure and make missing payments easier to investigate.

6. Consider Electronic Payment Alternatives

Many businesses use ACH payments for recurring transactions such as payroll and vendor payments.

PB&T’s ACH services provide an electronic option for payroll disbursements, vendor payments, and payment collections.

Electronic payments avoid risks associated with mailing paper checks, but they have their own fraud risks. Businesses should continue verifying payment instructions, monitoring accounts, and limiting employee access.

How We Help Businesses Monitor Check Activity

At Peoples Bank & Trust, we offer business banking tools that can support stronger payment and account-review procedures.

We offer Positive Pay for businesses that issue checks, along with ACH services for electronic payroll, vendor payments, and collections.

If you notice an unfamiliar check or other suspicious account activity, contact us promptly through a trusted PB&T phone number. Our business banking team can also explain the cash management services available for your accounts.

You can review our fraud and cybersecurity resources for more information about protecting business and personal account information.

Speak to a Local Business Banker Today

Questions About Business Check Fraud

What is check washing?

Check washing is a fraud scheme in which information is removed or altered on a legitimate check and replaced with different payment details. The payee, amount, or both may be changed before the check is deposited or cashed.

Is mail theft connected to check fraud?

Yes. Criminals may steal mailed checks and alter the payee or amount, create counterfeit versions, or deposit them using forged endorsements.

Can altered checks be detected?

Account review and services such as Positive Pay may help identify checks that don’t match the business’s authorized check information. No single tool can detect or prevent every fraudulent item.

What should I do if a business check is stolen?

Contact your bank promptly through a trusted number, review recent activity, and notify affected vendors or payees. If the check was stolen from the mail, consider reporting the incident to the U.S. Postal Inspection Service and local law enforcement.

How can businesses reduce check fraud risk?

Regular account reviews, clear internal controls, secure check handling, careful mailing procedures, and fraud prevention tools such as Positive Pay may help reduce risk.

Are electronic payments safer than paper checks?

Electronic payments avoid risks associated with mailing paper checks, including check washing and physical mail theft. However, electronic payments have their own fraud risks, so businesses should continue verifying payment instructions, monitoring accounts, and limiting account access.

When should I contact my bank?

Contact the bank immediately if you notice a check you didn’t issue, an altered amount or payee, missing checks, suspicious account activity, or a mailed payment that cleared but never reached the intended recipient.

Review Your Check-Handling Process

Paper checks may remain useful for some business payments, but the way they’re issued, mailed, stored, and reviewed deserves regular attention.

Confirm who can access blank checks, how outgoing payments are mailed, who reviews cleared items, and what employees should do when something doesn’t match the business’s records.

If you have questions about Positive Pay, ACH services, or suspicious activity involving your PB&T business accounts, our business banking team is here to help.

Talk With Our Business Banking Team

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