How to Prevent Check Fraud for Business Fraud

Key takeaways:

• Check fraud is still a major risk: 63% of organizations reported attempted or actual check fraud in 2024, making it the most common payment fraud method.
• The impact goes beyond money. Businesses hit by check fraud face financial losses, operational disruptions, and reputational damage.
• Prevention is possible. Strategies like Positive Pay, secure check stock, account reconciliation, and reducing check usage by shifting to electronic payments such as ACH, wires, or bill payment services can help significantly lower risk.

Businesses are going digital faster than ever, investing heavily in cybersecurity to keep data safe. But while the spotlight shines on online threats, an old-fashioned risk is quietly costing companies billions: check fraud. Despite being one of the oldest payment methods, checks remain a favorite target for criminals and the numbers prove it.

According to the 2026 AFP Payments Fraud and Control Survey, results indicate that payments fraud remains widespread, with 76% of organizations reporting they experienced attempted or actual fraud in 2025, making it the most frequently targeted payment method, despite its perception as outdated. Meanwhile, checks remain widely used, 91% of companies still use them and 75% send them via mail without tracking, often out of habit or lack of awareness.

Given the widespread use of checks and their vulnerability to manipulation, from forgery and counterfeit creation to subtle endorsement tampering, it’s clear that businesses must act. Strengthening people, processes, and technology around check management is essential to detecting fraud quickly and minimizing losses. In this article, we’ll explore why check fraud is on the rise and what you can do to stop it.

What is check fraud and why it matters for business

Check fraud happens when someone illegally uses a check to steal money or commit financial deception. It’s one of the oldest forms of payment fraud and still one of the most common. Criminals exploit checks because they’re easy to manipulate and often lack the security features of digital payments.

Common Types of Check Fraud

• Counterfeit Checks: Fake checks created to look legitimate.
• Forged Checks: Real checks with forged signatures or endorsements.
• Altered Checks: Genuine checks where details like payee names or amounts are changed.

Why does this matter? The impact goes beyond financial loss. Businesses hit by check fraud can face:

• Direct Costs: Loss of funds, legal fees, and recovery expenses.
• Operational Disruption: Time spent resolving fraud cases and tightening controls.
• Reputational Damage: Customers and partners may lose trust if fraud occurs.

Warning signs that your business may be at risk

Check fraud rarely happens without warning. Often, the first clues are subtle, but they can signal bigger problems ahead. Check fraud doesn’t always come with obvious warning signs. In many cases, checks sent through the mail can be intercepted, altered, duplicated, or forged without your knowledge, making it important to use secure payment methods and closely monitor your accounts for any unauthorized or unusual activity. Another red flag is repeated bounced or returned checks, which could indicate someone is testing your processes or attempting fraud. Finally, pay attention to discrepancies in the check details. While fraud isn’t always visible upfront, red flags can include mismatched signatures, altered payee names, or amounts that appear tampered with, all of which may signal a check has been altered or forged after it was sent.

Recognizing these warning signs early can help you act before losses occur. In the next section, we’ll explore practical steps you can take to protect your business from check fraud.

How to prevent check fraud

Check fraud isn’t just a lingering problem, it’s a growing one. Scammers are getting more creative, and businesses that rely on checks are prime targets. That’s why staying vigilant is critical. The good news? Preventing check fraud doesn’t have to be complicated. By combining smart practices with the right tools, you can significantly reduce your risk and keep your business safe.

1. Take advantage of Positive Pay

When it comes to preventing check fraud, Positive Pay is one of the most effective tools available. It helps businesses catch fraudulent checks before they clear, saving time, money, and stress.

How It Works

Positive Pay is a service offered by banks that compares every check presented for payment against a list of checks your business has issued. If something doesn’t match, like the check number, amount, or payee, the bank flags it as an exception. You then decide whether to approve or reject the payment. This automated process dramatically reduces the chances of unauthorized checks slipping through.

Fifth Third offers enhanced Positive Pay options designed to provide added layers of protection. Our Positive Pay services include payee name verification for added security and teller-maintained Positive Pay, which ensures checks are verified even at the branch level. For businesses that want full control, we also offer Reverse Positive Pay, allowing you to review and approve checks before they’re paid.

2. Use preventative measures to safeguard your business

Preventing check fraud starts with simple, proactive steps. These measures don’t just protect your finances; they help maintain trust with customers and partners. By making security part of your everyday process, you can stay ahead of fraudsters and reduce risk.

Here’s what you can do:

• Verify all checks before deposit
  Double-check payee names, amounts, and signatures to catch alterations or inconsistencies early.
• Use secure, watermarked checks
  High-security check stock makes it harder for criminals to create convincing counterfeits.

Leverage automated fraud detection systems

Banks provide ongoing monitoring of account activity using advanced detection systems that analyze patterns and flag potential irregularities, such as unusual check transactions or suspected alterations, helping identify possible fraud.

Taking these steps creates a strong first line of defense against check fraud.

3. Utilize check blocking

Check blocking is a security feature that prevents any checks from posting to your account while still allowing electronic debits and deposits to go through. In other words, it creates a hard stop for paper checks, eliminating one of the most common avenues for fraud.

When would you use it?

Check blocking is ideal for accounts that should never process checks, such as payroll or electronic payment accounts. By enabling this feature, you ensure that even if a fraudster tries to issue a check against that account, it won’t clear.

This simple step can close a major gap in your payment security strategy.

4. Perform routine bank account reconciliation

Once fraudsters find a weakness, they rarely stop at one attempt, they keep exploiting it until they’re caught. That means a single missed fraudulent check can quickly turn into repeated losses. The fastest way to shut that door? Daily account reconciliation.

Reconciling your accounts every day ensures that every transaction is legitimate and flags suspicious checks before money leaves your account. This simple habit can dramatically reduce your exposure to fraud and help you act before damage escalates.

Fifth Third offers Account Reconciliation services that provide fast, accurate activity reports to make this process easier. If you choose to reconcile in-house, remember one critical rule: those handling reconciliation should never be the same people issuing checks. This separation helps prevent internal fraud and keeps your controls strong.

Interested in exploring an account that simplifies reconciliation and supports fraud prevention? Learn more about standard checking.

5. Restrict check posting

Restricting check posting is a simple but powerful way to reduce fraud risk. This feature places a "post no checks" restriction on accounts that don’t need to process paper checks, ensuring that no check payments can clear against those accounts. Electronic transactions, like ACH debits and deposits, still go through, so your business operations aren’t disrupted.

When would you use it?

This option is ideal for accounts dedicated to electronic payments, such as payroll or vendor ACH transfers. By blocking checks entirely, you eliminate one of the most common fraud entry points for these accounts.

Adding this safeguard closes a critical gap and helps keep your funds secure. Looking for accounts with built-in fraud protection features? Explore our Checking Account Solutions.

6. Require dual signatures

For large check transactions, adding an extra layer of approval can make all the difference. Requiring dual signatures means two authorized individuals must sign off before a check is issued. This simple step increases visibility and reduces the chance of fraud slipping through unnoticed.

When would you use it?

Dual signatures are especially valuable for high-dollar payments, think vendor invoices, equipment purchases, or large service contracts. By involving two decision-makers, you create a strong safeguard against both external fraud and internal misuse.

Pro Tip: Set a dollar threshold for dual signatures, such as any check over $10,000. This keeps the process efficient while protecting your most significant transactions.

7. Reduce check usage with ACH and clectronic payments

One of the simplest ways to lower your risk of check fraud is to reduce the number of checks you issue. Moving to electronic payment methods, such as ACH transfers, wire payments, or other secure digital options, minimizes the changes of checks falling into the wrong hands.

Why it matters:

Every check in circulation is an opportunity for fraud. By switching to ACH for recurring payments like payroll, vendor invoices, reimbursements, and taxes, you cut down on exposure. Many banks also offer ACH Debit Blocking, which lets you control which companies are authorized to post ACH debits to your account, blocking unauthorized attempts.

Electronic payments aren’t just safer, they’re faster and more efficient, helping your business save time while reducing risk.

8. Train your team to recognize and prevent fraud

Even though most check fraud schemes involve outside parties, employees play a critical role in prevention. A well-informed team can spot red flags early and help protect your business from costly mistakes. Here’s how to build strong internal safeguards.

What to include in your approach:

• Educate employees on common fraud schemes
  Teach staff what check fraud looks like, altered amounts, forged signatures, and counterfeit checks, so they know what to watch for.
• Create clear procedures for handling checks
  Define who can issue and approve payments, set dollar limits for authorization, and outline steps for ordering and storing check stock securely.
• Encourage reporting of suspicious activity
  Make it easy and safe for employees to speak up if something seems off. A quick report can stop fraud before it escalates.

Regular training sessions and refreshers to keep fraud awareness top of mind. Consider adding fraud prevention to onboarding for new hires. Learn how Information Management Services can help you create secure, efficient processes for managing sensitive financial documents.

9. Designate employees to respond to bank enquiries

Strong communication is a critical part of fraud prevention. If your bank detects suspicious check activity, they’ll need quick confirmation from your business to stop the fraud before funds are lost. Designating a specific employee, or a small team, to handle these calls ensures the bank gets timely answers and your account stays protected.

Beyond responding to bank alerts, these employees should understand your internal check-handling procedures and know what to look for. Provide training on common fraud indicators, such as forged signatures or altered amounts, and make sure they know how to escalate concerns. For businesses that accept checks at the point of sale, frontline staff should also learn how to spot counterfeit checks and report anything unusual immediately.

Clear roles and consistent training create a strong line of defense against fraud.

Steps to take if your business is targeted

If you suspect check fraud, time is critical. Acting quickly can limit losses and prevent further damage. Here’s what to do:

• Contact your bank immediately
  Notify your bank as soon as you spot suspicious activity. They can stop payments, freeze accounts if necessary, and begin an investigation.
• Report fraud to authorities and regulatory bodies
  File report with local law enforcement and, if applicable, federal agencies such as the Financial Crimes Enforcement Network (FinCEN). This helps track patterns and prevent future fraud.
• Document the incident and implement corrective measures
  Keep detailed records of what happened, including copies of fraudulent checks and communication with your bank. Use this information to strengthen your internal controls and prevent repeat attacks.

Taking these steps quickly can make the difference between a minor incident and a major financial loss. For added protection against identity theft and related fraud, explore further options.

Ready to get started to improve your organization’s defenses against check fraud? Schedule time with a Fifth Third banker.