Commercial Insights
Check fraud prevention for businesses: Types, risks and best practices

Article 16 min read Updated August 11, 2026

It’s easy to overlook the age-old threat of check fraud, but it’s a costly mistake for business owners. Take these steps if your company has been targeted.

Key takeaways

Check fraud remains a leading payment fraud risk.
Criminals use check washing, check cooking, counterfeit checks, and mail theft.
Businesses should implement Positive Pay, dual control, transaction monitoring, and employee training.
Electronic payments can reduce exposure to paper-based fraud.

Paper checks may seem old school, but they are still a common payment method for many businesses—making them a compelling target for criminals.

You might think check fraud would be a thing of the past. But incidents of check washing, mailbox fishing, forgery and other crimes that involve checks remain elevated. The 2026 AFP Payments Fraud and Control Survey found that checks remained the most frequently targeted payment type, with 58% of organizations reporting check fraud in 2025. Additionally, 87% of organizations still use checks despite the risks, and 72% report no immediate plans to replace them, making check fraud an ongoing concern for businesses.

After the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an alert on mail theft-related check fraud in 2023, a review found $688 million in reported suspicious activity over 6 months. FinCEN discovered that the majority of stolen checks were altered and deposited, with some ending up as a template for counterfeit checks or fraudulently signed and deposited.

Check washing, in which criminals use chemicals to “wash” a check, is a well-known method for committing check fraud. But more sophisticated methods have emerged, says Cathy Powell, Treasury Management Product Manager at Regions Bank. “Now fraudsters are using software to do what’s called check cooking, which is using advanced image editing to meticulously re-create authentic checks. They’re also using AI tools to mimic check stock, signatures, fonts and seals, making it extremely difficult to detect.”

Business checks are often targeted because business accounts generally hold more funds than personal accounts, and it can take longer for the crime to come to light. If you’ve discovered that your business has been impacted by check fraud, it’s important to act quickly and carefully. Here’s how to report check fraud and take steps to protect against it.

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How does check fraud occur?

Check fraud can happen in a variety of ways. Mail theft is one common way for criminals to obtain checks for fraudulent purposes. Working alone or via an organized criminal network, these criminals may steal outgoing checks from U.S. Postal Service facilities, blue collection boxes or private mailboxes located in buildings or homes or incoming checks from the offices where they are delivered.

Once stolen, the checks may be altered or used to create counterfeit checks, which are then deposited—typically into a bogus account from which the funds are withdrawn before the fraud is ever detected.

Altered checks: Criminals may take a check and change the recipient's name and/or the amount on a check, often using a process sometimes called “check washing,” which uses chemicals to remove the original information from the check.
Counterfeit checks: Criminals may use a stolen check to create fraudulent checks. Using the information on the stolen check—including the authorized signature, account number, routing and transit numbers—they can create counterfeit checks that look like they were issued by the same company that issued the original check. Today’s technology has made it easier than ever to create realistic-looking fraudulent checks.

Fraud committed by employees

In some instances, check fraud may be committed by an employee who has access to the company’s accounts.

Unfortunately, if a company doesn't have solid internal controls in place to review outgoing and incoming payments, internal check fraud can be hard to detect—and it may go on for a while.

Investigating check fraud

If your company has been affected by check fraud, it’s important to act quickly, carefully and with discretion. First, check your accounts to make sure other instances of fraud haven’t occurred. If you find other discrepancies, make sure to keep a record of all transactions. As soon as possible, report the fraud to your banker. The sooner you tell the bank, the more options are available to investigate the fraud and attempt to limit further loss.

You should also consider contacting law enforcement, as appropriate. In some cases, financial institutions—like Regions—will assist the local law enforcement in its investigation. To help with the investigation, you’ll need to identify the recipient’s name and the amount on the original check. You may want to obtain an image of the fraudulent check from your bank and provide it to law enforcement.

Because it’s possible an employee may have been involved in the fraud, it’s important to limit who you tell about the incident. Consider not confronting, questioning or alerting any suspected perpetrators, as doing so may ultimately impede the success of the investigation.

How to safeguard against check fraud

Implementing or correcting processes in your organization can help protect your company against check fraud. Take a hard look at your internal processes and identify areas for improvement. Consider starting with these steps:

Review transactions. Use online banking to review daily transaction activity and check for irregularities, reconciling outstanding items. Set up automated alerts on account activity. These steps can help your company identify fraud quickly.
Add checks and balances. Make sure that employees who are authorized to sign checks are not the same people who reconcile the accounts. You may consider instituting two-person authorization on outgoing checks and payments, called dual control. Use Positive Pay services.
Audit. Conduct surprise account audits on a periodic basis.
Go digital. Opt for electronic payments over physical checks whenever possible. Solutions like Regions CashFlowIQ can help.
Avoid using mailboxes. Mailing checks inside the post office (rather than leaving them in mailboxes) may offer greater protection against the risk of stolen checks.

Finally, know that awareness can be one of the best lines of defense against fraud. Experts say it’s crucial to make sure your employees undergo a fraud training program.

“Employees are a critical part of efforts to prevent fraud,” Powell says. “They should be trained to recognize and report phishing attempts as well as to verify payment requests, especially those received as ‘urgent’ or from executive impersonators.”

In addition to your internal processes, take advantage of external procedures or treasury management products at your bank that can help you prevent payment fraud. For example, Regions Positive Pay service helps compare and verify checks presented for payment against issue information provided to by your business. The offering verifies the amount, the check number and, as an option, the recipient’s name, against the issue file you provide to the Bank. Any discrepancies will be reported to you for review.

Positive Pay is one of the most effective tools available for preventing check fraud, and leveraging Payee Name Verification can make it even more effective. This functionality within the Positive Pay service alerts the maker of the check to fraudulent alterations in the payee name and creates an exception for review.

Even if check fraud has already affected your business, taking time to improve your processes and help combat check fraud can help protect your company from a future loss. For more tips on how to protect your business against fraud, visit regions.com/fraud-prevention/business-fraud.

Next steps:

Review these best practices for preventing paper-based fraud.
Use technology to help detect and reduce the risk of check fraud. For example, consider Regions Positive Pay or a secure digital payment solution.
Consider whether you also need to protect against fraudulent ACH debits, which sometimes are called electronic checks. For example, explore Regions ACH Positive Pay.

Frequently asked questions

Check fraud is the unauthorized use, alteration, forgery, or counterfeiting of a check to illegally obtain funds. Common forms of check fraud include check washing, counterfeit checks, mail theft, forged signatures, and employee fraud.

Despite the growth of electronic payments, paper checks remain widely used by businesses and continue to be a major target for criminals. Business accounts are often targeted because they may contain larger balances and fraudulent activity can take longer to detect.

The most common types of check fraud include:

Check washing: Removing and changing information on a legitimate check.
Counterfeit checks: Creating fake checks using information from a stolen check.
Mail theft: Stealing checks from mailboxes or postal facilities.
Forged checks: Unauthorized signatures used to issue fraudulent payments.
Employee fraud: Internal theft involving company checks or payment processes.

Check washing is a form of fraud in which criminals use chemicals to remove the payee name, dollar amount, or other details from a check and replace them with fraudulent information before depositing or cashing the check.

Check cooking is an increasingly sophisticated form of fraud that uses digital editing software and AI tools to recreate realistic-looking business checks. Fraudsters may mimic check stock, signatures, fonts, and security features to produce counterfeit checks.

Criminals often acquire checks through mail theft, including theft from postal collection boxes, postal facilities, private mailboxes, or business offices. Once obtained, the checks may be altered or used as templates to create counterfeit checks.

Businesses can help reduce the risk of check fraud by:

Monitoring account activity daily.
Reconciling transactions regularly.
Setting up account alerts.
Implementing dual controls and segregation of duties.
Conducting periodic audits.
Using Positive Pay services.
Training employees to identify fraud.
Transitioning to secure electronic payment methods when possible.

Positive Pay is a fraud prevention service that compares checks presented for payment against a list of checks issued by a business. If discrepancies are identified—such as differences in the check number, amount, or payee—the business can review the item before payment is made.

If check fraud is suspected, businesses should:

Review all account activity for additional fraudulent transactions.
Document unauthorized transactions and discrepancies.
Notify their financial institution immediately.
Obtain copies of fraudulent items when available.
Contact law enforcement if appropriate.
Review and strengthen internal controls to help prevent future incidents.

Yes. In some cases, check fraud is committed by employees who have access to company payment systems or accounts. Strong internal controls, segregation of duties, dual approvals, and periodic audits can help reduce this risk.

While no payment method is entirely risk-free, electronic payment solutions can reduce exposure to many forms of paper-based fraud, including mail theft, check washing, and counterfeit checks. Businesses may benefit from evaluating digital payment options as part of a broader fraud prevention strategy.

Businesses should review account activity frequently—ideally daily—to identify suspicious transactions quickly. Early detection can improve the chances of limiting losses and stopping additional fraudulent activity.

Potential warning signs include:

Unexpected withdrawals or cleared checks.
Missing checks.
Checks clearing for incorrect amounts.
Payments made to unknown recipients.
Unusual account activity or account alerts.
Unreconciled transactions during account reviews.

Yes. Employee education is an important component of a fraud prevention program. Training can help employees recognize phishing attempts, verify payment requests, identify suspicious activity, and understand proper reporting procedures.

A layered approach is often most effective. Businesses should combine strong internal controls, employee training, account monitoring, fraud-prevention services such as Positive Pay, and secure electronic payment options to help protect against check fraud.