February 10, 2025—As tax season approaches, millions of Americans prepare to file their returns, and about 20% of tax refunds will be issued by check. Concurrently, approximately one million taxpayers who did not previously claim the 2021 Recovery Rebate Credit will receive a payment issued by the U.S. Treasury. The distribution of rebate checks and payments will unfortunately attract various fraudulent activities.
The Rise of Mail Theft-Related Check Fraud
The US Treasury’s Financial Crimes Enforcement Network (FinCEN) issues an annual warning about check fraud related to mail theft. While their data is not exclusive to Treasury-issued checks, previous spikes in mail theft do coincide with high volume distributions, as was seen during the COVID-19 pandemic with the issuance of stimulus checks. The sheer volume of US Treasury checks circulating through US postal network this year through May raises the threat level of this growing type of fraud. Earlier this month, the Federal Bureau of Investigation issued similar warnings about the surge in mail theft-related check fraud citing criminal methods ranging from theft from mailboxes and mail room bins, break-ins at USPS facilities, and even robberies, bribery, and collusion of USPS employees.
According to these agencies and the US Postal Inspection Service, criminals may alter and deposit the stolen check (including through check washing or check cooking), sign and deposit the check, use them to produce counterfeits, or even sell the check information on the dark web. As with all types of fraud, the level of sophistication varies. However, regardless of the complexity, the impact is the same—significant financial loss for both consumers and financial institutions.
Tools to Mitigate Mail Theft-Related Check Fraud
Data shows that criminals are far more likely to deposit a stolen check via remote deposit capture or ATM to avoid a savvy teller or agent. Vertifi’s RDC, ATM/ITM, and Branch Capture services include a number of tools to detect and respond to potential fraud. Some stop potentially fraudulent items at the point of deposit, while others put the power in the hands of system administrators at the time of deposit review.
Our remote deposit capture solution, DeposZip®, includes, for example, an optional, fully automated US Treasury Check Verification System (TCVS) tool to assist financial institutions in validating and checking the status of US Treasury-issued items. For other check processing service users, a manual version of this tool is available for ad-hoc testing of individual checks.
In January 2025, the RDC Treasury Check Verification System tool was updated in Vertifi’s RDC administrative portal to include the payee name, which allows you to determine a match with the account holder depositing the funds at the time of deposit review. This tool allows you to get funds into the hands of your customers quickly while mitigating the potential risks associated with these payments.
Outcomes and Reporting
Small to mid-sized banks file the most reports of theft-related check fraud. Check fraud is complex, and only a very small percentage of the funds recovered. As reported by the Internet Crime Complaint Center, “In many cases, financial institutions, consumers, and law enforcement agencies are not aware of the fraudulent activity until after the funds have been illicitly withdrawn.” For the US Treasury and other government entities issuing checks, an investigation and reissue of payment to the rightful party can be time-consuming and costly. Still, financial institutions should consider how to best implement available security controls and risk mitigation tools to identify and quickly respond to potential fraud and based on their audiences and the level of threat they pose.
This blog content is provided for informational purposes only and does not constitute legal advice.