Check Fraud Law and Legal Definition

Check fraud is a criminal act which involves the unlawful use of checks to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership. This is one of the largest challenges facing businesses and financial institutions today. With the advancement of computer technology it is increasingly easy for criminals, either independently or in organized gangs, to manipulate checks in such a way as to deceive innocent victims expecting value in exchange for their money.

Check fraud can occur in many ways. For example

  • Check kiting (an illegal practice whereby a person profits from float, by depositing and drawing checks between accounts at two or more banks)
  • Paper hanging (purposely writing checks on closed accounts (their own or others), as well as reordering checks on closed accounts (their own or others)
  • Forgery (in business it can happen when an employee issues a check without proper authorization. It can also happen when criminals steal a check, endorse it and present it for payment at a retail location or at the bank teller window, using bogus personal identification.)
  • Counterfeiting (can either mean wholly fabricating a check using readily available desktop publishing equipment or simply duplicating a check with advanced color photocopiers)
  • Alteration (using chemicals and solvents such as acetone, brake fluid and bleach to remove or modify handwriting and information on the check. When performed on specific locations on the check such as the payee's name or amount, it is called-spot alteration; When an attempt to erase information from the entire check is made, it is called-check washing)