In recognition of International Fraud Awareness Week, Texas Capital is sharing a series of insights designed to help individuals and businesses protect their financial well-being. Today’s focus is on Check Fraud — a prevalent and evolving threat that can result in significant financial losses if not properly guarded against. To see our previous insights for the week, please visit our feature on how to spot social engineering in Business Banking.  

While digital payments continue to rise, checks remain a staple in many business operations — especially for vendor payments, payroll and large transactions. But with that continued use comes a persistent threat: check fraud. It’s one of the oldest forms of financial crime, yet it continues to evolve and cost businesses billions each year. 

At Texas Capital, we believe that knowledge is your first line of defense. Here, we explore how check fraud happens, how to detect it early and what your business can do to prevent it. 

What Is Check Fraud? 

Check fraud is the unauthorized use or alteration of a check to illegally acquire funds. It can be as simple as forging a signature or as complex as producing counterfeit checks that appear legitimate. 

Common Types of Check Fraud: 

• Forgery: Signing a check without authorization
• Counterfeit checks: Creating fake checks using stolen account details
• Check washing: Using chemicals to erase and rewrite check information
• Alteration: Changing the amount or payee on a valid check
• Paperhanging: Writing checks from closed or overdrawn accounts 

According to a Federal Reserve survey, check fraud accounted for 30% of total fraud losses at financial institutions in 2024, making it the most common form of payment fraud in business banking.  

Detecting Check Fraud Early 

Early detection is critical to minimizing financial loss and reputational damage. Fraudsters often rely on subtle changes or timing gaps to avoid detection. 

Red Flags to Watch for: 

• Duplicate check numbers or out-of-sequence checks
• Unusual payment amounts or payees
• Altered handwriting or inconsistent ink
• Checks issued outside of normal business hours or patterns
• Missing or mismatched signatures 

Tools That Help: 

• Positive Pay: Matches checks presented for payment against a list of issued checks
• Account reconciliation services: Quickly identifies discrepancies
• Transaction alerts: Notifies you of large or unusual activity in real time 

Preventing Check Fraud in Your Business 

While no system is foolproof, businesses can significantly reduce their risk by implementing layered security protocols and fostering a culture of vigilance. 

Best Practices for Check Fraud Prevention: 

• Use secure check stock with anti-fraud features like watermarks and microprinting.
• Restrict access to check-writing and signing authority.
• Implement dual controls for issuing and approving checks.
• Reconcile accounts daily to catch discrepancies early.
• Train employees on fraud awareness and reporting procedures.
• Transition to digital payments where possible to reduce paper-based risk. 

Texas Capital’s Approach to Check Fraud Prevention 

At Texas Capital, we offer a comprehensive suite of fraud prevention tools tailored to the needs of businesses. Our solutions are designed to detect threats early and empower your team to act quickly. 

Our Business Clients Benefit from: 

• Advanced fraud monitoring systems
• Positive Pay and ACH filters
• Secure treasury management platforms
• Dedicated relationship managers
• Ongoing education and client resources 

Explore our Fraud Prevention Solutions and Business Banking Services to learn more. 

Stay Ahead of the Check Fraud Curve 

Check fraud may be an old tactic, but it’s far from obsolete. With the right tools, training and banking partner, your business can stay ahead of fraudsters and protect its financial integrity. By recognizing the signs, implementing strong internal controls and leveraging Texas Capital’s fraud prevention solutions, you can confidently manage your check-based transactions.

Reach out to a Texas Capital advisor today or explore our Security Resources to learn more about protecting your business from check fraud.