At the bottom of every cheque is your bank’s branch transit number and financial institution number, as well as your personal bank account number. At the top is your full name and address, and, if you’ve signed the check, your signature. In short: everything is necessary for someone to commit cheque fraud and put your money at risk.
Even though cheque use has been declining over the years, Canadian financial institutions still process almost a billion cheques every year. With such a high volume of cheques traveling between consumers, post offices, banks, and businesses, they are a target for fraud and identity theft. Likewise, if a cheque is stolen or lost it cannot be replaced or canceled as easily as credit and debit cards that have built-in security features.
In fact, CIBC’s privacy and security policies state that cheque fraud is one of the oldest and most common forms of financial crime. For example, with fraudulent or counterfeit cheques, criminals create counterfeit cheques or change the details on a real cheque for their financial gain.
How often does cheque fraud occur? More than you might expect. The most recent Statistics Canada research found that 29 percent of fraud against banks was cheque fraud. There are three main types of cheque fraud:
To protect yourself from cheque fraud, financial institutions suggest rather dated ways to keep your cheques secure. They suggest locking your cheques away in a secure location. Keeping track of cheque numbers and amounts. Double-checking with the cheque sender that the information was correct and legitimate. Review monthly bank statements regularly and notify your bank if there is any unusual activity.
But that is all very manual and reactive, rather than proactive. Besides, do financial institutions have policies to review signatures and for fraud on cheques? What happens if you do become the target of cheque fraud?
Global News found that many banks have a policy to not review signatures under a certain amount. That certain amount is usually $5,000, which can make a serious impact on a person’s financials or small business’ bottom line. One bank spokesperson said that it is policy to verify every cheque either by a teller or with an automated system, but because of the volume of cheques cashed every day, that some do get through without being flagged. Lower dollar value cheques and those cashed through an ATM tend to not get flagged.
In the Global News article, one Calgary business owner discovered a cheque that had been written from his business account by someone other than him for $2,700 to someone he had never met. He contacted the bank immediately when he noticed the issue, however, they initially said they would not do anything because he waited too long to notify them. Since the article came out, they did, in fact, reimburse him.
The Bank of Canada states that “any individual who, knowingly or not, accepts counterfeit bears the loss.” Counterfeit cheques can be a serious financial loss for both the individuals involved and the businesses, especially if they cannot be reimbursed. Not only do fraudulent cheques often go undiscovered for some time, but they may also impact a business's cash flow and profits, depending on the amount.
Beyond financial loss, bad cheques take a toll on public confidence—both of the banking system, the security of the cheques, the individuals, and the businesses involved. Regaining trust is difficult and takes time.
Interestingly, 90 percent of people who use third-party applications and e-commerce sites to store payment information are confident that their financial information is secure.