Check Fraud

Check fraud is a deceptive practice aimed at gaining unauthorized access to funds by misusing or manipulating checks. It can take several forms, from check kiting to stolen mail, but the goal is the same: to gain financial advantage through fraudulent means. At Alliance Credit Union, we're committed to safeguarding your financial well-being and equipping you with the knowledge you need to protect yourself. Let’s take a closer look at three common types of check fraud: Check Kiting, Floating Checks, and Stolen Mail.

Check Kiting 

What is Check Kiting? Check kiting is a form of fraud that involves moving funds between accounts at different banks to take advantage of the time it takes for checks to clear. For instance, a person might write a check from one bank account (without sufficient funds) to deposit into another account. They then quickly write another check to cover the first check’s amount before the banks realize there aren't enough funds. The individual gains unauthorized access to funds that don’t actually exist.

Why is Check Kiting Harmful? This practice creates a cycle of artificially inflated balances, which can cause serious financial harm to banks and credit unions, as well as potentially hefty penalties for the person involved. Not only is check kiting illegal, but it can also result in overdraft fees, frozen accounts, and criminal charges.

How to Protect Yourself:

1. Monitor Your Accounts Regularly: Regularly check your account balance and transaction history for any unfamiliar activity. Early detection can prevent serious issues.


2. Use Digital Alerts: Set up alerts for deposits, low balances, and large withdrawals. These can provide real-time insights into your account’s status.


3. Avoid Floating Checks: It’s essential to wait until funds are deposited and available before writing a check or making a transfer. By maintaining a steady balance, you can avoid accidental overdrafts and fraud suspicions.

Check Floating

Check floating is a practice where someone writes a check despite not having sufficient funds in their account, banking on the time it takes for the check to clear. This delay creates the illusion of available funds, allowing people to make purchases or transfers that their account can’t actually cover. While some might see check floating as harmless, it’s illegal and can result in severe penalties, including overdraft fees, frozen accounts, and even criminal charges.

How to Protect Yourself:

1. Verify Funds Before Writing Checks: Ensure you have enough funds in your account before writing a check.


2. Monitor Your Account Regularly: Check your balances frequently to keep an accurate picture of available funds.


3. Use Account Alerts: Set up notifications for low balances or large transactions for real-time monitoring.


4. Avoid “Borrowing” Between Accounts: Don’t rely on transfers from other accounts if funds aren’t immediately available.


5. Be Cautious with Post-Dated Checks: Avoid writing checks post-dated with future deposits in mind; this can lead to accidental overdrafts.

 

Stolen Mail

How is Stolen Mail Connected to Check Fraud? Stolen mail often contains sensitive information, including checks, which criminals can alter or replicate to access funds illegally. When checks are stolen from your mailbox, they can be modified or “washed” (a method where criminals erase the original ink on checks to change details) and used for unauthorized withdrawals. Even worse, personal information from stolen mail can be used for identity theft, putting your financial security at even greater risk.

How to Protect Yourself from Mail Theft:

1. Use Secure Mailboxes: Consider using a locked mailbox to protect your incoming mail, send and receive mail at the Post Office, or pick up sensitive items directly from your credit union branch.


2. Opt for Digital Statements: By choosing paperless statements, you eliminate the risk financial information being intercepted in the mail. You can view these statements using our Mobile App or Online Banking. 


3. Monitor Incoming Mail: Be aware of when you should receive important financial documents. If something seems delayed, it could be worth investigating to ensure it hasn’t been intercepted.

Alliance Credit Union’s Commitment to Your Security

At Alliance, we employ rigorous security measures to protect your account information and transactions, and we’re here to help if you suspect fraud.

How we're prepared to combat Check Fraud:

1. Automatic Hold on Checks Deposited at our ITMS: When you deposit a check, we’ll place a hold on it for 3 business days to ensure everything clears properly. However, the first $300 of your total deposit each day will be available to you right away.



2. Same-Day Review During Business Hours: If you deposit a check during our normal business hours, we’ll review it that same day. Based on the check, we may either release it earlier or adjust the hold.


3. Next-Day Review for After-Hours Deposits: If you deposit a check after our business hours, don’t worry—we’ll review it the next day to see if it can be released sooner.

Update to Savings Accounts:

1. Savings Accounts Now Non-Transactional: All savings accounts are now considered non-transactional, meaning they are not subject to the same immediate funds availability rules as checking accounts.




2. Flexible Check Holds for Added Security: Since these accounts are non-transactional, we have more flexibility with check holds. If we detect any potential risk, we can hold the entire check deposit without needing to release any portion of it right away.

Why We Made These Changes:

1. Reducing Losses: These updates help us protect against potential losses by allowing time to review all checks deposited at the ITM before funds are released.




2. Enhanced Review by Vault Tellers: With this new process, our Vault Tellers can carefully review each check and adjust holds when needed, keeping your accounts safer.

If you suspect fraudulent activity on your account, call the ALLIANCE Contact Center, Monday through Friday from 7:30am to 6:00pm at 806.798.5554 or toll-free at 800-687-4328.

Check fraud is a serious issue, but with awareness and proactive habits, you can protect yourself. As always, Alliance Credit Union is here to support you in safeguarding your financial well-being. Let’s stay vigilant together!