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The Envelope: A Check Fraud Prevention Solution That Fails


CALIFORNIA - Scribbling his signature quickly on the monetary instrument, CEO J. Russell Finch hurriedly stuffed the check into the protective cocoon that was a business envelope. He had to get it to a supplier to restock his inventory of edible seaweed. The Pacific Edible Seaweed Company had never been better. Everyone now wanted edible seaweed. Russell thought back to what his mother-in-law Mrs. Marcus had said all those years ago about it being a worthless endeavor. The old bag…he'd shown her.

The check was for around $100,000. That was a lot of money thought Russell. It would also be a lot of seaweed. He sealed the addressed check in the envelope and placed a stamp in the top right corner. Another payment ready to go. It went into a small pile of outbound mail. Other checks were to be sent to other vendors. The whole thing was becoming a large operation. Finch would need to hire more people soon.

About a week passed by, uneventful by the CEOs standards. Then one day he got a call from the supplier.

"Hey Russ, it's Andre from SeaWeedies. Do you know when the payment will come for the shipment we sent?"

"Andre, it should be there. Let me check the bank statement." Russell logged in to his online banking. Searching for check 1963, he scrolled the screen. Yes, check 1963 had been negotiated...but for a different amount. "Andre, I need to call you back. Something is going on with my account. I’ll get the payment out as soon as I can."

He disconnected the phone and viewed the check. Same number but a different amount. It was paying an individual; a Tammy Kellogg who appeared to live in a different state. Looking further, he saw other checks following 1963 that he had not written. And they were all paying people who lived in different locations.

The CEO called his bank to indicate the fraud. Some of the checks could be returned while others had to be recovered on. He disputed the activity and began to work towards setting up a new account. It was apparent that the check to SeaWeedies had been intercepted by a crook. He would likely never know the details. It was time to update his payment method as well. Over the next few months, he would shift to using ACHs to pay his suppliers. No more lost or stolen checks in the mail. No, his edible seaweed business was far too important for that.

The paper envelope as we know it today is a sad fraud prevention solution. Envelopes protect checks up to the point where they are swiped. The check inside gives the mail bandit all the information they need to counterfeit new ones. They can also attempt to negotiate the stolen check by forging the endorsement or altering the item. Mail is vulnerable at multiple points in its journey from sender to recipient, making it harder to track and pinpoint the culprit. That isn’t to say that law enforcement is not out there investigating and stopping mail fraud; they are.

A deeper look reveals that envelopes are mere paper. While a sealed envelope may fool a novice, savvy postal picker perps are able to cut through the paper to get the desired check inside. Most check writers who send checks via mail do not have an alarm or self-destruct system attached to the envelope. Because of this, mailed checks are easy game so long as the fraudster can break the seal or cut them open. At times, these criminals will get paper cuts when doing so, but this does not often discourage or deter them...they are that committed.

J. Russell Finch's move to ACH payments decreases the likelihood of his new account being exposed (so long as he protects his business' online banking). He can then refocus his efforts on expanding and promoting his edible seaweed.

As for checks, they still have their place; the BMV, a child or grandchild's birthday, paying for girl scout cookies. Maybe a few other use cases but that is about it. The point is that the paper itself exposes the account information. It is too easy.

It's a mad, mad, mad, mad world when it comes to check fraud. Limiting usage, transitioning to newer electronic/digital payment methods, and not sending account details through the mail are just a few ways to decrease the likelihood of an exposure and subsequent fraud.

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