What Is an Altered Check?
An altered check is a check or another negotiable instrument that has been materially and maliciously altered to effect a fraud. Usually, either the name of the payee, the amount of the check, or the dateis changed.
Key Takeaways
- An altered check is a form of check fraud that includes an altered check in the form of malicious changes.
- Such changes that constitute an altered check include changes in the amount and payee name.
- Generally, the fraud must be reported by the customer within a year to ensure recovery of the loss.
- Banks can refuse to honor a check if it believes it has been altered.
- To help prevent check altering, the Office of the Comptroller of the Currency (OCC) suggests not leaving large spaces in the number and amount lines.
How an Altered Check Works
An altered check is one of four common types of check fraud, the other three being forgeries (imitated signature), counterfeit checks (fake), and remote checks (instead of a signature, there is a bogus statement that the account holder has authorized a check). Altered checks are specifically addressed in the Uniform Commercial Code (UCC) Section 3-407. The term "alteration" is defined as either:
- An unauthorized change in an instrument that purports to modify in any respect the obligation of a party.
- The unauthorized addition of words or numbers or another change to an incomplete instrument relating to the obligation of a party.
Under the UCC, the liability for an altered check can reside with the various parties involved, including the customer drawing the check, the bank on which the check is drawn, and the bank that presents the check, depending on the evident negligence. Sometimes the liability of an altered check falls with the drawer of the check and other times it's the drawee or depository banks. A drawee bank can refuse to accept the loss in certain circ*mstances, such as customer negligence or if the fraud was perpetrated by a repeat wrongdoer.
Ordinarily, a customer needs to examine their bank statement and report the loss within 30 days. Regardless of any negligence by the drawee bank, a customer will be barred from recovery if they do not report the loss within one year.
Special Considerations
The Office of Comptroller of the Currency (OCC) of the U.S. Department of Treasury makes suggestions to protect against this type of fraud. First, customers should avoid leaving large blank spaces in the number or amount lines when they write checks; second, they should report to the drawee or payer financial institution when their checks are stolen.
Financial institutions should review checks to ensure that the handwriting of letters or numbers is consistent throughout and that there are no visible signs of erasure or alteration.
Banks, credit unions, and other financial institutions can use automatic systems called positive pay to match checks to the issuing companies. If a bank believes a check has been altered, it can refuse to honor it.
Example of an Altered Check
An altered check is usually changes made to the name or amount. For example, the dollar amount of a check can be changed from $100 to $1,000. Dollar amount changes are easier than changes made to names.
