Counterfeit Checks: What Business Owners Need to Know

You start your morning like any other—coffee in hand, quick check of your online banking, getting ready for the day ahead. Then you see it: a large check you don’t recognize has cleared your account.

The payee isn’t a vendor you know. The amount is far more than your typical check. And suddenly, you’re thinking about payroll, payments to other vendors, and whether your account has been compromised.

This is what it feels like when a counterfeit check hits your account—and it’s happening to businesses of all sizes across Wisconsin and beyond.

What Is a Counterfeit Check?

A counterfeit check is a fake or altered check using real account information that belongs to you or your business. It’s one of the most persistent forms of business check fraud, and it doesn’t require a sophisticated operation to pull off. Fraudsters can make these checks look very real, using your business name, address, and even your logo. They may get your information from hacked systems, or copies of checks you previously issued to vendors.

How Does a Counterfeit Check Clear My Account?

1. A fraudster alters a legitimate check or creates a fake one using your real account information.
2. They deposit the check at a financial institution or through mobile deposit.
3. The check moves through the normal check-clearing process in the banking system.
4. If nothing flags it as unusual or unauthorized, the check can clear—meaning funds are removed from your account and sent to the fraudster’s bank.

Common ways your check info gets out there:

• Stolen or copied checks from the mail
• “Check washing,” where a real check is altered and then copied
• Data breaches or compromised accounting systems
• Lost or stolen check stock

What Happens if a Counterfeit Check Clears Your Business Account?

First, the money really does leave your account. Until the item is reported and investigated, it looks like any other check that has cleared. You may feel the impact right away: less cash on hand for payroll, vendor payments, and day-to-day expenses.

If you don’t catch it quickly, more counterfeit checks may follow using the same account information.

Once you report it, your bank begins an investigation. This may involve reviewing the image of the check, confirming whether it matches your typical check style, and determining whether it was authorized. There are rules and timelines that apply to disputed items, and every situation is a little different. That’s why speed matters—reporting suspicious checks as soon as you notice them gives your bank more options to help.

What Should You Do If You Spot a Counterfeit Check?

1. Contact your bank right away.
   Call your treasury services or primary bank contact as soon as you notice something unusual.
   
   
2. Review your account activity.
   Look back at other checks that have posted recently to see if there are more items you don’t recognize.
   
   
3. Work with your banker on next steps.
   This may include signing an affidavit, enrolling in check and/or ACH fraud filtering tools (like Positive Pay) that may be offered by your bank, updating check stock, changing internal controls, or even closing and reopening the account.
   
   
4. Tighten internal controls.
   Review who has access to checks, who approves payments, and how often accounts are monitored.

How to Reduce Your Risk Before It Happens

Start with access controls: limit who can write and sign checks, and store check stock securely-avoid using pre-signed checks. Reconcile accounts frequently, ideally daily for high-activity accounts, and train employees to spot red flags and to treat checks like cash. Enrolling in a fraud protection service like Check and ACH Positive Pay adds a meaningful layer of protection. And where possible, shifting payments to services like ACH reduces your exposure altogether.

How Positive Pay Helps Stop Counterfeit Checks

Positive Pay is a fraud prevention service that helps your bank verify checks before they clear your account. It’s one of the most effective tools available for protecting against counterfeit and altered check fraud.

Here’s how it generally works:

• You share a list of the checks you’ve issued—usually with check numbers, issue dates, amounts, and payees.
• When a check is presented for payment, it is checked against the above four data points.
• If something doesn’t match, the check is flagged as an exception, and you have the opportunity to decide whether to pay or return it.
• This creates an extra layer of protection between your account and fraudsters, catching many counterfeit or altered checks before they can drain your funds.

Why Having a Local Treasury Services Team Matters

Fraud is stressful, and the last thing you want is to work through it with a call center that doesn’t know your business. A local treasury services team—right here in Dane County—understands how your accounts typically operate and can spot unusual activity quickly. Because they know you, they can respond fast when something looks off, tailor tools like Positive Pay to the way you actually work, and help strengthen your overall payment processes to reduce your exposure to fraud.