FinCEN Warns of Surge in Check Fraud Schemes

FinCEN warned financial institutions of a recent surge in check fraud schemes targeting the U.S. mail system and urged financial institutions to report any suspected mail theft-related check fraud.

In a Risk Alert, issued in collaboration with the U.S. Postal Inspection Service, FinCEN reminded institutions to report suspected check fraud schemes that may be linked to mail theft and offered guidance to help appropriately identify such instances. FinCEN said that mail theft-related check fraud is increasingly being committed by non-postal service employees, including organized criminal groups.

FinCEN alerted financial institutions on red flags associated with check fraud, including:

• uncharacteristically large withdrawals via check to a new payee;

• customer complaints of stolen checks that were then deposited into an unknown account, or that the check was never received by the intended recipient;

• existing customers with no history of check deposits suddenly making rapid check deposits, withdrawals or transfers of funds;

• abnormal depositing of checks, often electronically, followed by rapid withdrawal or transfer of funds;

• faded handwriting underneath darker handwriting on checks (e.g., checks that appear to be overwritten);

• other suspicious account activity, including COVID-19 pandemic-related fraud;

• new accounts seemingly only used for check deposits with subsequent withdrawals or transfers of funds; and

• non-customers attempting to cash a large check or multiple checks in person, especially if they provide suspicious or evasive answers when questioned by the financial institution.

FinCEN urged financial institutions to file a suspicious activity report ("SAR") as soon as practicable if a customer is suspected of mail fraud.

FinCEN asked that institutions reference the alert in the SAR to indicate a connection between the suspicious activity and suspected mail fraud. The alert also included information on additional resources available to financial institutions to report suspicious activity.