By: Thomas Clement, MRA General Counsel and Vice President of Operations
Check washing is a criminal activity involving the chemical removal of ink from legitimately-issued financial instruments and re-drafting those instruments for a fraudulent purpose. Interestingly, while check writing is way down, the Financial Crimes Enforcement Network (FinCEN) reported in 2023 that check fraud has more than doubled over the past three years, with check washing a significant contributor. There are many reasons for this, including the low-tech nature of paper checks and the simplicity of ink removal.
There are a number of ways you can protect yourself from fraudulent check washing. Most importantly: regularly monitoring your accounts. In the course of reviewing all checks that have been cashed, you should verify both the amount and the payee. Oftentimes, with a high dollar check, scammers will only change the payee, making it less likely for the drawer to notice the change. In addition to regularly monitoring your accounts you should only deposit outgoing mail in an inaccessible collection box, collect your mail immediately after it is delivered, and never leave mail in your mailbox overnight. Further, new checks should be picked up at the bank rather than having them mailed to you, never throw checks away without first shredding, and, perhaps the most effective precaution, utilize online payments.
In the event that you become a victim of check washing, you should report it to your bank immediately. While there will be significant hassle with closing the affected account, opening a new account, ordering new checks, etc., there is a good chance you can recoup the stolen funds. MCL 440.4401(1) provides that “{a} bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.” Courts have interpreted this statute to create an implied rule that banks may not charge against a check that has been altered and, if they do, they bear responsibility to make the customer whole. While there are exceptions to this implied rule, primarily where the account holder substantially contributes to the alteration or fails to report in a timely manner, the general rule does provide welcome protection.
