Law enforcement jurisdictions often have dollar amounts (some fairly high), which must be met before a case is actively investigated - causing it to be recorded as a statistic. And in the private sector - a lot of NOT very "clear reasons" are used to return checks, which might or (might not) mean fraud.
My two favorites reasons the banks use to return checks are "refer to maker" and "stop payment." This might mean someone was unhappy with a service that was performed, or it could mean the item is counterfeit and the owner of the account placed "stop payments" on the checks. It's even possible that items returned as NSF (non-sufficient funds) are forgeries, or counterfeits because the owner of the account has yet to discover their account has been compromised.
The same holds true with "fraud accounts" that banks open for crooks (new account fraud). New account fraud occurs when fraudster(s) open an account (often with fake information), write a series of checks for a lot more than what is in the account, and disappear (literally).
Often they do this over a weekend, and withdraw the amount they initially deposited, also.
New account fraud items normally return as (NSF) non-sufficient items until the bank closes the account. Once this occurs, they are classified as "account closed." Non-sufficient fund and account closed items are normally not considered a fraud classification.
The only thing that is certain is that the loser is going to be the party, who accepted the check, and not the banks. In fact -- some believe the banks are the winners in this process -- because they make a lot of money from "bounced check" fees.
In a lot of the recent Internet scams, customers have even gone to a bank employee to ask if an item is good. After trusting the employee's expertise, the check was deposited and the funds were made "available." A few days later, the item was returned as fraud and the customer's account was "garnished."
And in all the cases, I've heard where this happened, the bank didn't accept any liability. Here's a post, I wrote about this:
Don't Trust a Bank to Tell You Whether a Check is Good, or Not
The other day, I came upon an article by SmartPros, indicating that a "possibility exists" that check fraud will rise in the coming year.
According to SmartPros:
Identity theft trends in the next year may include an increase in check fraud, check synthesizing and check counterfeiting, according to The Identity Theft Resource Center, a nonprofit victim assistance center.SmartPros story, here.
In case no one has been watching - check fraud appears to have been growing rapidly over the past several years. It's true that all the bogus "financial paper" circulating aren't only checks, we are seeing a lot of counterfeit money orders, also.
Counterfeit cashier's checks and other bogus paper financial instruments (money orders, travelers and gift cheques) have been showing up in secret shopper, romance, lottery, work-at-home and auction scams at ever increasing rates. The situation seems to be getting worse - as more and more people - become Internet users.
In fact, eBay recently announced they will no longer offer any protection for paper financial instruments on their site.
And so far as the amount of them out there, there is evidence that bogus paper financial instruments are being produced on an industrial level:
Are Counterfeit Documents being Mass-Produced in Nigeria?
The Federal Deposit Insurance Corporation sends out alerts on all the counterfeit cashier's checks, which are pretty hard to keep up with. If you want to see what I mean, link here.
We read a lot about "DIY" (do-it-yourself) kits being sold to commit phishing and eBay fraud in shady Internet crime forums -- but in the case of checks -- DIY kits are openly sold in stores, and available on e-commerce sites.
In fact, there are a lot of "legitimate companies" selling all sorts of software, printers and even magnetic ink, which are capable of turning out some pretty convincing counterfeits. Throw in a computer, and it's not very difficult to start making checks.
To show all the "DIY check technology" for sale on the Internet, I ran a Google search, here. Of course, a lot of this (including the paper) can be bought at your local office supply store, also.
As with a lot of fraud, technology seems to be enabling the problem.
Although check fraud might continue to grow, there is little doubt that it's already a huge problem. BankersOnline did an article in 2002 stating:
About five years ago, U S NEWS and WORLD REPORT did the most in-depth study on this that we've had, and I've used their figures ever since. They probably are low by now. They said the financial institutions in the United States lose about $12 Billion a year in check fraud, and the retail industry loses a like amount. The total loss being $24 Billion as a result of check fraud. I think identity theft is getting a lot of publicity now - but it's been around for a long time. We just never gave it the designation of identity theft.
Since this report is now 5 years old and it is using figures that were 5 years old -- no one probably knows how much check fraud is really going on.
I guess until everyone comes up with some uniform standards, it's going to be impossible to determine how much check fraud is really out there.
BankersOnline article by Barbara Hurst, here.
A great resource on check fraud is the National Check Fraud Center. Their site provides a lot of expert information on check fraud and how to protect yourself from it.
Is check fraud on the rise? Despite the lack of statistics - my best guess is that it is!