Never Heard of Check Washing & Still Mailing Checks? Read This.

Updated: November 9, 2022

If you are unfamiliar with check washing and still need to mail important checks, here’s how you can protect yourself from being a victim of check fraud.

On a recent Nextdoor post, a neighbor recounted an unfortunate story of having paid her property taxes via a mailed check to the County Tax Assessor, only to receive a letter from the County after 60 days, requesting payment on the delinquent tax with an added penalty fee.

The distraught neighbor promptly checked her statement, saw that the check in question had been cashed and called the Tax Assessor’s office to find out why they were sending her another bill. The Assessor confirmed they had not received payment, even though the neighbor confirmed that the check had been cashed per her bank statement.

The neighbor then called her financial institution to request an image of both the front and back of her cancelled check. What she discovered was shocking.

The check had been endorsed, not by the County Tax Assessor’s Office, but by someone named “Johnson“. Even more disturbing was the fact that the “Payee” had been changed from “County Tax Assessor” to “Johnson“. Everything else on the check was intact including the neighbor’s original signature.

How could this have happened?

Here’s what you need to know about check washing and how to prevent yourself from being victimized.

What is Check Washing?
Know Your Rights and Responsibilities
Who is Liable for a Washed Check?
Reconcile Your Bank Statement, Payments & Key Accounts Every Month
What to Do If You Suspect Check Fraud
How to Prevent Check Washing Fraud
Alternatives to Writing Checks
Check Washing Resources
Related Reading

Also see:

Important Must-Have Legal Documents for Homeowners

Best Online Legal Services for Homeowners

What is Check Washing?

When checks are stolen, usually en route to the payee in the mail, fraudsters use various household chemicals to “wash” or remove the original “payee” and dollar amounts to write in a fraudulent name and often higher amount for deposit or cash for their own benefit.

This is also known as check alterations. In many cases, the swindlers have banking knowledge and know what not to do in order to give themselves the requisite time to abscond cleanly with their ill-gotten gains before their crime is detected.

Check Washing and Check Fraud Countermeasures from Ask Sileo

Check Washing and Check Fraud Countermeasures - Ask Sileo

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Check Washing Is Not New

Check washing is not a new crime, as it has its beginnings in the mid-1980’s when there were fewer options for bill remittance and many customers were dependent on making payments by check. However, more than 30 years later, improved ink technologies, payment alternatives and banking fraud detection tools have helped to thwart this crime… somewhat.

Despite these advances, the United States Postal Inspector reports that check fraud is rampant to the tune of billions of dollars every year, as the crimes of check washing, forged endorsements or alterations have not been publicized enough to convince consumers to stop mailing checks to pay their bills.

Check washing is easy, frequent and rarely goes detected in time to catch or prosecute the perpetrators. The Banking Industry would be embarrassed if the public were more aware of the amount of check fraud. Many banks decline to aid the authorities or agencies, especially when they are not legally liable, even though those banks are the very ones that opened an account for a fraudster.

In the Nextdoor example, the criminal chose to leave the dollar amount intact for two reasons that make it difficult to detect the fraud quickly:

1. When you leave the dollar amount as it was written on the original check, the account holder is less likely do detect fraud until it is too late to investigate.

Unfortunately, the average person would only check to see that the check was cashed and for the same amount written in their check register. By altering the dollar amount, the fraudster would be increasing the odds of being detected, especially if there is not enough money in the account to cover higher amounts.

In the neighbor’s case, the fraud went undetected until the Tax Assessor notified her more than 60 days later that she was in fact delinquent, since they had not received her tax payment. During the two months that passed, the fraudster had likely already emptied and closed the account with little to no paper trail left to investigate.

2. If the check washing involves a total dollar amount of $10,000 or more, the fraudster would have triggered a banking rule that requires banks to report transactions greater than $10,000, as part of a single transaction or as two or more related payments.

By increasing check amount above $10,000, the fraudster unknowingly increases the paper trail, making it easier to track fraud and eventually recover stolen funds and even prosecute the crime.

Know Your Rights and Responsibilities

So, if in a check washing situation, what is a consumer to do? First, know your rights and responsibilities as a consumer. There are responsibilities for both parties, the bank and the customer, and by understanding and adhering to those responsibilities, you can be shielded from fraud losses.

The Uniform Commercial Code (UCC or notated, §) is a set of comprehensive laws that govern all commercial transactions in the United States. These laws are uniform across all states and are adopted for all interstate transactions of business.

In the banking world, there are many UCC articles which banks must follow and make known to their customers in their account policy booklets. In the case of check washing or check fraud, customers must know and understand UCC 4-406.

UCC 4-406 reads in part (extracted from the Cornell Law School Legal Information Institute):

4-406. CUSTOMER’s DUTY TO DISCOVER AND REPORT UNAUTHORIZED SIGNATURE OR ALTERATION.

“(a) A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid. The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.

(b) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.

(c) If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.

(d) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (c), the customer is precluded from asserting against the bank”

Simply stated, the bank is responsible for sending the customer a statement of his account and the customer is responsible for reviewing the statement and reporting any and all discrepancies within a reasonable amount of time.

The long and short of §4-406 is that you, the customer, have a responsibility to report any items on your statement that are erroneous or in dispute. The law also states that this dispute must be made within a “reasonable amount of time”, which is usually defined in the account policy booklet given to you when you opened the account.

However, in the example of the neighbor whose check was hijacked in the mail, the bank statement would not have alerted her to any wrongdoing, as the amount paid, and the check number appeared as a check number and amount without listing the payee.

If leveraging online banking services, checking account holders can view digital images of cancelled checks, which will confirm the key details of the check (date, payee and amount).

Had our neighbor reviewed her account online, which would have given her an image of the cancelled check, she would have caught the fraud within the reasonable amount of time required.

We take the payment of accounts via check a step further by reviewing our outstanding accounts, after payments are sent. In this case, we verify our online Property Tax profile, to make sure that our status read “Current” and our balance is “0” after the 10th day of the final due date.

Proactive follow-up will give you time within the bank’s reasonable amount of time window to dispute any irregularities and puts the liability back on the bank in case there is a need to make you whole for the disputed amount.

Who is Liable for a Washed Check?

If the check writer follows their obligations as defined in their account policy booklet, the bank that cashed the check is liable for the amount issued for a materially altered check.

The key obligation that the check writer must meet, in order to not be liable for the altered amount cashed, is to notify their bank within a “reasonable amount of time” – as specified in their account policy booklet – of any suspected irregularities or suspicious activity.

To prevent being liable for a washed check, always reconcile your bank statement on a monthly basis, including confirming payee names and corresponding dollar amounts.

Reconcile Your Bank Statement, Payments & Key Accounts Every Month

In the case of check fraud, the liability is high for the consumer, as a compromised account can result in a bank account being completely drained if the fraud goes undetected. A hijacked check can be washed or used to make counterfeit checks unbeknownst to the account holder.

Furthermore, hijacked or washed checks can lead to account delinquency, in this case an unpaid property tax bill, which can lead to a property tax lien and perhaps a foreclosure of the property.

A delay in reporting errors on your bank statement can wreak havoc on your credit report, as you fight both the bank and the original payee, who is still owed the funds that you intended to pay with the original check.

Additionally, your signature on the hijacked check can be used for nefarious means such as purchases, or opening new credit accounts, further worsening your credit score.

Subscribing to a credit monitoring service and actively reviewing your report on a monthly basis is vital to detecting any nefarious actions taken against your accounts or identity.

What to Do If You Suspect Check Fraud

First, call the bank and close the account immediately and notify all payees for whom you have written any outstanding or pending checks.

Open a new account and make good on the outstanding checks by re-issuing payments with your new account. All of the checks from the compromised account will be marked as “forgeries” and will not be honored by any merchants you intended to pay.

File a police report, as this will be necessary in order for the bank to begin its investigation.

Collect all vital information as requested for law enforcement and the bank in order to prosecute the case.

Notify the three credit reporting agencies should your compromised information be used to open fraudulent accounts or to make unlawful purchases.

Experian: 888-397-3642
TransUnion: 800-680-7289
Equifax: 800-525-6285

Subscribe to a credit monitoring service. Many are free for basic subscriptions.

How to Prevent Check Washing Fraud

Check and reconcile your bank statement monthly

Know your rights per your contract with your financial institution. If the policy is 30 days from the date of the statement, make sure to reconcile your account within that 30 day window. Notify the bank immediately of any discrepancies, errors or disputes.

Hand deliver checks to the intended recipient, such as at a payment window, and always make sure to get a receipt.

Always use printed address labels for your return address. Fraudsters can trace your signature from the return address of your envelope in order steal your identity.

Do not use checks to pay bills that require you to send that payment in the mail.

However, if your only option is to drop a check in the mail use caution and follow these tips:

Do not place check-filled envelopes in unsecured blue mailboxes (AKA collection boxes) located in public locations. This is an open invitation for fraudsters to “fish” items out of the box, especially when the last pickup is in the middle of the afternoon.
Protect yourself and deliver any and all mail items to the post office and place your envelopes in the internal drop boxes, which are directly behind the counter.
Use non-washable ink or gel pens for all your check writing and contract signatures. Uni-ball SIGNO series gel pens are the perfect foil against check washing, as the gel permeates the paper and creates a strong bond that will not smear, fade or wash away, as will regular ink. The best pen to use is a black, gel pen which is near to impossible to wash away.
Use high security checks which have holograms that disintegrate when washed

Invest in a high-quality shredder, to keep your disposed documents secure, even after they have left your home.

Our rule of thumb is any item with your name, account numbers or address should be shredded. We tear off any address labels from “junk mail” and run them through the shredder as they come in.

Retrieve your mail frequently.

In other words, do not allow mail to sit in your mailbox for extended periods of time, and especially not overnight

Alternatives to Using Checks

When possible, make important payments such as mortgage, property taxes, home insurance online with e-receipt verification (e.g. EFT or ACH payments)
Use credit or debit cards
Use a digital wallet payment system (e.g. Apple Pay, Zelle, Google Pay, PayPal, etc,)
Always take a screen shot of any online payment, and your account with the current date and the zero balance.