Just after the beginning of the year on the evening of January 16th, 2024, an armed man held up a postal worker. He demanded the worker’s keys for public and apartment mailboxes along several routes in Edmonds, WA.
Unfortunately, this is not an isolated incident. Residents in this upscale area were already locking their mailboxes due to a history of mail theft in the area, and the risk is also heightened throughout the rest of the country. Here’s what you need to know about this trend in 2024.
Why Are Thieves Stealing Mail?
Thieves typically steal mail so that they can find paper checks. They’re primarily looking for outgoing mail that people have sent to pay their bills with checks, but they also look for incoming checks. For example, a thief may take a check that a consumer has written to their electric company. Or they may intercept a birthday check that a grandparent has sent to their grandchild.
This type of bank fraud doesn’t require a lot of knowledge. Thieves don’t have to learn how to code to break into a database. They don’t have to write a clever email to phish details out of an account holder. They just need to open a mailbox or hold up a postman to get what they want. Then, they can learn everything they need to complete the process on the dark web or even in social media groups.
What Do Thieves Do With Stolen Checks?
Thieves wash checks to remove the written data. By soaking the check in special chemicals, they can remove the payee’s name and the written and numerical amounts from the check. However, they maintain all of the other data on the check, and if they’re careful, they can even keep the signature intact.
Once the check is clean, the thief has carte blanche. They can write out the check to anyone they like for any dollar amount they like. The thief has several different options at this point. They may create a fake ID, write the check to the name on the ID, and cash the check at a check cashing store. Alternatively, they may take the check to a retailer and use it to buy items. Or, they may open an account, put the check in the account, and then take the cash and run. Often, however, they just take the check straight to the bank and cash it over the counter.
However, many mail thieves are focused on volume. Instead of cashing the checks themselves. They sell the checks online. According to David Maimon, a Georgia State University professor and criminologist specializing in fraud, stolen checks sell for between $125 and $2000 each or even more online. Thieves always show the date when selling stolen checks, to convince buyers that the checks are fresh.
Once someone buys a stolen check, they use any of the methods noted above to cash it. Sometimes, they use the info on the check to open accounts in the account holder’s name which they use for various types of fraud. They may even open new accounts in a business’s name with the hopes of cashing multiple checks before detection.
Rising Numbers in Mail Theft-Related Check Fraud
In 2023, the Financial Crimes Enforcement Network (FinCEN) issued an alert to financial institutions about the rising risk of mail theft-related check fraud, and although no numbers have been posted for 2024, the trend seems to be on the rise with multiple stories popping up in the media in the first few weeks of 2024 alone.
Check theft from the mail has been on the rise since the COVID-19 pandemic. Thieves began gravitating toward this crime when the government sent out COVID-19 relief checks, and they haven’t stopped.
From March 2020 to February 2021, there were 299,020 complaints of mail theft, an increase of 161 percent from the previous year. The following year, in 2021, financial institutions filed 350,000 Suspicious Activity Reports (SARs) to FinCEN about check fraud, a 23% increase over the previous year. In 2022, the number of SARS related to mail check fraud jumped to 680,000, nearly double the previous year.
From May to November of 2023, the USPS arrested 600 people for robbing mail carriers and stealing mail. In the early days of 2024, similar stories have popped up around the country, with cases in Illinois, Pennsylvania, Georgia, South Carolina, New Jersey, Florida, and many other locations.
Hot Spots for Stolen Checks
Analysis of stolen checks for sale online indicates that there are several hotspots where these crimes are the most prevalent. At one point in September of 2023, researchers found the following numbers of checks for sale online from these cities:
- Houston – 448 checks
- Chicago – 314 checks
- Philadelphia – 172 checks
- New York – 149 checks
- Miami – 124 checks
However, the threat exists everywhere. Because thieves can easily sell checks online, checks stolen from one location are often cashed on accounts in other states.
Check Theft by USPS Employees
There is also a risk of check theft by USPS employees. In November 2023, a former USPS employee and two conspirators were charged with conspiracy to commit financial institution fraud and five counts of theft of government property. The former employee was also charged with theft of mail by a postal employee, while the other two were charged with possession of stolen mail matter.
The employee stole $24 million in checks while working for a USPS processing center; approximately $8 million of the checks were U.S. Treasury checks. Then, working with the conspirators, he listed the checks for sale online and mailed them to buyers after they paid through CashApp or a Bitcoin wallet. In just a few months, the three conspirators made hundreds of thousands of dollars.
Red Flags of Mail Theft-Related Check Fraud
The red flags of mail theft-related check fraud overlap with the general red flags of check fraud. To catch potential issues, financial institutions should look at the context of all presented checks. They should have tools that assess the risk of presented checks based on the account holder’s historical financial activity, and they should also look for the following red flags:
- Large amounts on checks written to a new payee.
- Customer complaints about stolen checks.
- Customer reports about mailed checks that weren’t received by recipients.
- Checks with a different check stock than the stock used by the issuing bank.
- Accounts with no history of check deposits that have sudden check deposits followed by withdrawals.
- Dormant accounts with sudden check deposits followed by withdrawals.
- Newly opened accounts with multiple check deposits followed by quick withdrawals or transfers.
- Unusual patterns of check deposits, often electronically, followed by quick ATM withdrawals or wire transfers.
- Faded writing underneath the writing on the check, indicating that the original info has been washed off.
- Non-customers attempting to cash large checks in person and acting suspiciously when asked questions.
How to Protect Your Financial Institution From Stolen Checks
Educate your customers about the risks. According to the United States Postal Service, the USPS intercepts about $1 billion in stolen checks and money orders every year. The service advises people to do the following to protect themselves: 1) deposit mail as close to possible as the last pick-up times, 2) don’t leave mail sitting in mailboxes, and 3) have the post office hold your mail if you’re unable to retrieve it in a timely matter.
Unfortunately, your bank is liable for the losses if someone steals your customers’ checks and your bank clears them when presented on the account. To protect yourself, you need a comprehensive check fraud solution. Efforts should include check image analysis, signature verification, and positive pay for commercial account holders. Insist on AI-driven solutions that can monitor checks automatically and alert your team when issues arise.
You also need to provide your employees with extensive training on fraud risks. Savvy criminals often try to convince tellers to overlook red flags and cash checks over the counter. Criminals also recruit mules to help them with these scams. For instance, they may find a legitimate account holder online and convince them to cash checks through their account in exchange for a cut. Often, the mules don’t even realize the extent of the crime they’re engaging with. Your tellers are the front line of defense in these situations.
Check Fraud Solutions and Services
At SQN Banking Systems, we offer comprehensive, real-time, AI-driven check fraud solutions. Don’t ignore this rising threat. Instead, contact us for help today. We can assess your current risks, look at your fraud workflows, and guide your financial institution to the best fraud solutions for your needs.