Informational only. This article is general education about published government guidance and common bank services. It is not financial, legal, or tax advice, and it does not recommend any payment method, product, or provider. Confirm requirements with your bank, your processor, and a qualified professional before changing any process.
Many businesses have moved most vendor payments to ACH, wire, and card, yet paper checks still show up in accounts payable: older vendors, landlords, municipalities, and one-off payees. Checks are also where a lot of fraud attempts concentrate, because the information needed to forge or alter one (routing number, account number, signature, payee line) is printed on the instrument itself. This article explains how check fraud works at a high level, what the federal government has published about it, and what positive pay is and is not, so finance teams can ask their banks better questions.
What Federal Sources Say About Check Fraud
The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an alert on mail theft-related check fraud on February 27, 2023. According to FinCEN Alert FIN-2023-Alert003, financial institutions filed more than 350,000 check fraud suspicious activity reports (SARs) in 2021, a 23 percent increase over 2020, and check fraud SARs reached over 680,000 in 2022, nearly double the previous year. FinCEN notes that the 2022 figure counts all SARs with the check fraud box marked and is not specific to mail theft. The same alert reports that the U.S. Postal Inspection Service received 299,020 mail theft complaints from March 2020 through February 2021, a 161 percent increase over the same period a year earlier.
Separately, Executive Order 14247, Modernizing Payments To and From America’s Bank Account (March 25, 2025), directed Treasury to stop issuing paper checks for federal disbursements beginning September 30, 2025, to the extent permitted by law, with limited exceptions. The order states that Treasury checks are “16 times more likely to be reported lost or stolen,” returned undeliverable, or altered than an electronic funds transfer. That figure is the order’s own statement about federal disbursements; it is not a measure of any private company’s experience, and we cite it only to show how the federal government described the difference in risk between the two payment types.
Common Check Fraud Patterns
FinCEN’s alert lists red flags that banks watch for. Reading them from the business side is useful, because they describe how the schemes tend to look in practice:
- Stolen and re-deposited checks. A check mailed to a vendor is taken from the mail and deposited into an unrelated account. FinCEN lists a customer reporting that a mailed check was never received by the intended recipient as a red flag.
- Altered checks. FinCEN describes examined checks that show faded handwriting beneath darker handwriting, suggesting the original payee or amount was overwritten.
- Counterfeit check stock. FinCEN lists withdrawal checks that appear to be on a different check stock than the issuing bank’s known stock.
- Large checks to new payees. FinCEN lists non-characteristic large withdrawals by check to a new payee as a red flag.
If a check you issued is stolen and altered, the first sign is often a reconciliation difference or a vendor asking where their payment is. That is one reason timely reconciliation matters regardless of which controls you use.
What Positive Pay Is
Positive pay is a bank service, usually offered to business account holders, that compares checks presented against your account with a record of the checks you actually issued. In the common arrangement, the business sends its bank an issue file (check number, amount, and date, and in some versions the payee name). When a check is presented for payment, the bank matches it to the file. Items that do not match, or that are not on the file, are flagged as exceptions, and someone at the business decides whether to pay or return them within the bank’s deadline.
Features, fees, cut-off times, and file formats vary by bank, and we are not aware of a single federal definition that governs every product sold under this name. A few terms you may see:
- Positive pay. Matching on check number and amount.
- Payee positive pay. Adds the payee name to the match, which addresses altered payee lines.
- Reverse positive pay. The bank sends you the presented items and you compare them with your own records.
- ACH positive pay or ACH debit filters. Lets you approve which companies may debit your account. This relates to ACH, not checks.
What Positive Pay Does Not Do
- It does not stop a check from being stolen from the mail. It helps catch an item presented that does not match your file.
- It depends on your issue file being accurate and sent on time. A delayed file can create false exceptions.
- It does not address fraud that starts with a tricked employee, such as a fraudulent request to change a vendor’s payment details. Our article on business email compromise and vendor change controls covers that separate risk.
- It does not cover your own deposited checks. A check you receive from a customer carries its own risks, which are managed through your bank’s deposit and return processes.
Questions to Ask Your Bank
- Which positive pay options do you offer (check number and amount, payee match, reverse positive pay), and what do they cost?
- What are the exception review cut-off times, and what happens if no one responds by the deadline? Many banks let the business set a default of pay or return.
- What file formats and delivery methods do you accept from our accounting or ERP system?
- Does the service cover all of our accounts, including payroll and disbursement accounts?
- Who at our company can approve exceptions, and how is that access protected?
Reducing the Number of Checks
The other side of the control conversation is reducing check volume. Moving routine vendors to ACH changes the risk profile and the cost and timing tradeoffs, which we compare in paper checks vs. ACH for B2B cash flow. ACH has its own rules; the Nacha fraud-monitoring requirements are summarized in our 2026 Nacha compliance quick-start, and our look at the Same Day ACH $10 million limit discusses why verifying payees matters more as payment sizes grow. For wire and remittance data, see our article on Fedwire and ISO 20022.
Whatever mix you use, the practical basics are consistent across the sources above: reconcile bank activity promptly, restrict who can issue and approve payments, verify any change to payee bank details through an independent channel, and report suspected fraud to your bank quickly. FinCEN’s alert directs mail theft victims to the U.S. Postal Inspection Service.
Where to Get Help
If you are comparing how ACH, card, and other payment options fit into your accounts payable and receivable, a merchant services broker can walk through what your acquirer and bank offer. Call 866-305-6454 to discuss ACH, card acceptance, and gateway options for your business.
Disclaimer: This content is informational only and is not financial, legal, or tax advice. Rules, bank products, and fees can change; verify details on the linked source pages and with your financial institution.
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