check fraud
Running a Management Company

In an increasingly digital age, where electronic transactions and online banking have become the norm, it may be easy to assume that old-fashioned check fraud has become a thing of the past. However, recent developments suggest otherwise. Check fraud, a crime that involves the unauthorized use of checks for fraudulent purposes, is experiencing a resurgence, posing a significant threat to individuals and businesses alike. For association management companies, check fraud can pose a significant threat to the health of the business and reputation with homeowners.

The Rise of Check Fraud

A recent article published by The Wall Street Journal sheds light on the alarming surge in check fraud incidents across various parts of the world. In 2022, banks filed 680,000 check-fraud reports, according to the Financial Crimes Enforcement Network, or FinCEN, part of the Treasury Department. That’s almost double the 350,000 fraud reports filed in 2021.

There are several reasons why check fraud is on the rise. Some of these factors include:

  • Technological Advancements and the Digital Divide: While digital payment methods have gained widespread popularity, there remains a segment of the population that still relies on traditional paper checks. This divide creates an opportunity for fraudsters to exploit the less secure infrastructure associated with check-based transactions.
  • Sophisticated Fraud Schemes: Criminals have become increasingly adept at leveraging advanced techniques to perpetrate check fraud. This includes counterfeiting checks, altering legitimate checks, forging signatures, and exploiting vulnerabilities in remote deposit capture systems.
  • Data Breaches and Identity Theft: The rise in data breaches and identity theft incidents has provided fraudsters with access to personal and financial information. Armed with these details, they can manipulate or fabricate checks with convincing accuracy, deceiving banks and individuals alike.
  • International Fraud Networks: The global nature of modern criminal networks allows for the swift movement of illicit funds and resources. International gangs specializing in check fraud can operate across borders, making it difficult to track and apprehend the perpetrators.

Consequences of Check Fraud

The consequences of check fraud can be devastating for both individuals and businesses. These include:

  • Financial Losses: Victims of check fraud can suffer significant financial losses, as funds are unlawfully withdrawn from their accounts. The aftermath may involve a prolonged and arduous process to recover the stolen funds and restore financial stability. For a management company, this could mean a loss of significant income for months if not years.
  • Reputational Damage: Falling prey to check fraud can damage the reputation and erode homeowner trust. Homeowners and board members may lose faith in the management company’s ability to safeguard their financial information, leading to a loss of business and potential legal repercussions.
  • Legal Consequences: In cases where individuals unknowingly become accomplices to check fraud schemes, they may face legal repercussions, including criminal charges and possible imprisonment. It is crucial to be vigilant and report suspicious activities promptly.

Protecting Against Check Fraud

While the resurgence of check fraud may be disconcerting, there are proactive steps individuals and businesses can take to mitigate the risks. Daily account reconciliation is one way to ensure that check fraud is caught quickly. With one button click, a mismatch in budgets can be caught easily and efficiently.

It’s also important for management companies to embrace digital alternatives. Whenever possible, opt for solutions such as CINC’s VendorPay, the first fully integrated AP solution in association management that offers end-to-end efficiency for your AP processes.​

While the rise of check fraud may seem like a step backward in the fight against financial crime, it serves as a stark reminder that criminals continuously adapt to exploit vulnerabilities in our financial systems. By staying vigilant, embracing digital alternatives, and implementing robust security measures, management companies can protect themselves from falling victim to this resurgent menace.


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