The Check Fraud Schemes Small Businesses Are Seeing Right Now

You’d think paper checks would be too old-fashioned to interest criminals in 2026. The opposite is true.

The surveys look at the problem from different sides, but both show that checks remain a significant fraud target.

Small businesses may have fewer people separating payment preparation, approval, and account review. When one employee handles several of those tasks, clear procedures and regular account monitoring become especially important.

Why Are Checks Still a Frequent Fraud Target?

A check carries sensitive information in plain sight: your bank routing number, account number, business name, and signature. Then, in many cases, it travels through the mail.

Businesses can’t always stop using checks. According to the 2026 AFP Payments Fraud and Control Survey, 72% of organizations that use checks expect to continue using them, and 68% cite vendor requirements as a reason.

If your feed supplier, landlord, contractor, or equipment dealer requires a check, another payment method may not be practical.

That makes it important to understand where a check may be exposed, how criminals use the information on it, and which controls can make fraudulent activity easier to detect.

When a Check Is Stolen and Washed

Check washing usually begins with mail theft.

Someone steals a check and uses chemicals to alter the payee, the amount, or both. Because the signature and other parts of the check may remain unchanged, the altered payment can be difficult to recognize at a glance.

The FBI’s mail-theft and check-fraud warning identifies several places where checks may be stolen:

• Residential or business mailboxes, especially when mail sits overnight
• USPS collection boxes after the final pickup
• Postal facilities
• During delivery to the intended recipient

In the 2026 Federal Reserve Financial Services survey, 21% of participating financial institutions reported an increase in check washing.

When Check Information Is Used to Create Counterfeits

Counterfeiting doesn’t always require access to the original checkbook.

One image of a legitimate check can expose the routing number, account number, check design, and other information. Criminals may use photo-editing software and printers to create counterfeit checks. The FBI refers to this digital manipulation as check cooking.

Counterfeit checks showed the largest reported increase among the check-fraud types highlighted in the 2026 Federal Reserve Financial Services survey. Thirty-two percent of participating financial institutions reported an increase.

These may appear as a series of smaller, unfamiliar checks rather than one unusually large payment. That can make the activity easier to miss during an infrequent account review.

When a Check Is Forged or Altered

A stolen check can be misused in several ways.

In one version, the check remains otherwise unchanged but is deposited using a forged endorsement. In another, the amount or payee is altered before the check is deposited. A $500 payment, for example, may be rewritten as $5,000.

In the Federal Reserve survey, 18% of participating financial institutions reported an increase in payee forgery.

Timing can make these schemes harder to stop. The FBI explains that financial institutions must make check funds available within specified timeframes. In some cases, the funds may be withdrawn before the account holder or financial institution identifies the fraud.

Regular account review can help your business notice an unfamiliar check number, payee, amount, or signature sooner.

When a Vendor’s Payment Instructions Change

Check fraud and email fraud can intersect when a criminal changes the instructions surrounding a legitimate payment.

A criminal may gain access to your email account or a vendor’s account and monitor an existing payment conversation. Then, the criminal sends a message that looks routine:

Your business mails the check, but it goes to the criminal instead of the vendor.

Business email compromise affected 74% of organizations participating in the 2026 AFP survey. The FBI 2025 IC3 Annual Report also recorded approximately $3.05 billion in reported business email compromise losses across 24,768 complaints. These figures cover many forms of business email compromise, not only mailed-check schemes.

Who May Be Responsible When a Fraudulent Check Clears?

Responsibility for a fraudulent check isn’t automatically assigned to the bank or the account holder.

It may depend on the type of fraud, how the check was handled, how quickly the issue was discovered and reported, the bank’s actions, the business account agreement, and applicable law.

Missouri law requires customers to examine account statements with reasonable promptness and promptly notify the bank about an unauthorized signature or alteration. The law also addresses later checks involving the same wrongdoer after the customer has had a reasonable period to review the statement.

How to Protect Your Business

A few changes can make altered or counterfeit checks easier to detect.

Handle Outgoing Checks Carefully

• When possible, take checks inside a post office rather than leaving them in a mailbox or collection box after the final pickup.
• Don’t leave outgoing checks in an unsecured mailbox overnight.
• Retrieve incoming mail promptly.
• Consider using indelible gel ink, which may be more resistant to chemical alteration.
• Ask vendors to alert you when an expected payment doesn’t arrive.

Add a Check-Review Tool

Review Account Activity Regularly

• Review activity more frequently during high-volume payment periods.
• Look at check images, not only the amounts.
• Confirm that the payee, amount, and check number match your records.
• Use available account and transaction alerts.
• Assign someone to review Positive Pay exceptions and suspicious activity when the primary reviewer is away.

Control Employee Access

• Use role-based account access so authorized employees receive only the access needed for their responsibilities.
• Don’t share online banking credentials.
• Remove access promptly when an employee leaves or no longer needs it.
• When practical, separate payment preparation from payment approval.

Reduce Mailed Checks When Practical

You may not be able to stop using checks if vendors require them. However, moving an eligible recurring payment to ACH means one fewer check passing through the mail.

Payroll and established vendor payments may be places to begin. Electronic payments still require appropriate account controls and independent verification of new or changed payment instructions.

What to Do If Check Fraud Happens

If you discover a stolen, altered, or counterfeit check, act promptly.

1. Contact your bank immediately. Ask about stopping the payment, securing the account, and starting the appropriate review or dispute process.
2. Review recent account activity. Look for unfamiliar checks, ACH transactions, transfers, or changes in payment patterns.
3. Preserve your records. Save check images, statements, emails, invoices, authorization records, dates, and the names of people contacted.
4. Report suspected mail theft to the U.S. Postal Inspection Service.
5. Consider filing reports with the appropriate law-enforcement agencies, based on the circumstances and guidance from your bank or legal advisor.

If you bank with us, contact your local branch as soon as you notice suspicious account activity.

How We Help Midwest Businesses

We work with local business owners, farms, contractors, and family-owned companies throughout the Midwest. When something looks wrong, you can contact a local team familiar with the businesses and communities we serve.

Our business online banking gives eligible businesses access to:

• Real-time balances
• Transaction history
• Account alerts
• Role-based employee access
• ACH services
• Positive Pay

Our team can explain the business banking tools we offer and discuss how they may support your payment process. A shop running weekly payroll may have different needs from a farm making seasonal payments or a family-owned business where several employees handle financial tasks.

We can also discuss your business deposit accounts and the check-fraud tools available through our business banking services.

Explore Our Business Banking Services Talk With Our Team

Frequently Asked Questions

What is check washing?

Check washing occurs when someone steals a check and uses chemicals to alter its payee, amount, or both. Other information, such as the account holder’s signature, may remain unchanged, which can make the altered check look legitimate.

Why are checks frequently targeted by fraud?

Checks contain account and routing numbers, business information, and signatures on a physical document that may travel through the mail. Criminals may steal and alter the original check or use its information to create counterfeits.

What is Positive Pay, and how can it help detect check fraud?

Positive Pay compares checks presented for payment with information the business previously provided. Checks that don’t match the authorized check information are flagged for the business to review.

Does Positive Pay protect ACH and wire payments?

Positive Pay is intended for check-payment review. New or changed ACH, wire, and other electronic payment instructions should still be independently verified using trusted contact information and the business’s established approval procedures.

How often should a business review account activity?

Review account activity regularly and consider checking more frequently during high-volume payment periods. Reviewing check images and payee information can help identify suspicious activity that may not be obvious from the transaction amount alone.

What should I do first if a check is stolen or altered?

Contact your bank immediately. Ask about stopping payment, securing the account, and beginning the appropriate review process. Preserve relevant records, review the rest of the account activity, and report suspected mail theft or criminal activity to the appropriate agencies.