Over the same period of 2022 — from January to October — there had been 420,000 reports of check fraud from depository institutions. By the end of that year, the number of reports exceeded 500,000, which is double the number of check fraud reports from 2021.

In a stark example of how check fraud is affecting banks, Regions Financial reported during an earnings call in October that it had lost $135 million to check fraud between April and September. Regions Chief Financial Officer David Turner pointed out at the time that check fraud has increased dramatically industrywide but said the bank was "reasonably confident" that the prior increases would not persist.

Fincen said in a warning in February that check fraud has been on the rise in large part due to more reports of mail theft. Criminals steal checks out of the mail then copy or alter them to fraudulently redirect money. Regulation E protects bank customers from large check fraud losses stemming from mail theft, leaving payor and payee banks to fight over which institution is liable.

In the warning, Fincen enumerated methods banks can employ to detect check fraud, including monitoring for deposits to accounts that have no prior deposit history, large withdrawals to a new payee, checks cleared out of sequence with past checks or check stock that is different from that which the issuing bank uses.

While banks can and do still monitor checks for signs of alterations, these signals can be harder to detect due to the shift toward remote deposit capture, according to Jim Hitchcock, the vice president for fraud mitigation at the American Bankers Association. Hitchcock said the shift toward electronic check clearing was in part spurred by the Check Clearing for the 21st Century Act, also known as Check 21.

"The unintended consequence is that proving alterations and forgeries has become more difficult," Hitchcock said in a post in an ABA blog last month. "Alterations are less apparent, and many of the traditional security features evident on paper checks are lost when the originals are scanned for processing and then destroyed."

The fight against check fraud is complicated as well by the organization of the criminal enterprises perpetrating it. In a typical case of check fraud, a check is stolen alongside numerous other parcels from the United States Postal Service — often one of the service's blue drop boxes, which criminals can break into to collect numerous pieces of mail at once.

From there, fraudsters chemically wash or digitally alter the check to remove the payee and dollar amount. They then give the check to a "walker" — a person who can credibly deposit the check without triggering the bank's attention — to deposit into a "mule" account — an account controlled by a fraudster but that has been carefully maintained to appear legitimate. Finally, the account controller withdraws or moves the funds to complete the theft.

Observers have offered numerous potential solutions to the check fraud problem, ranging from more secure mailboxes to stop mail theft at its source to educating consumers about how to avoid the temporary financial crunch a fraudulent check can put on a household.

In a news release this summer, the Federal Reserve Bank of Boston suggested consumers deposit mail with checks inside post office locations, using pens with ink that can't be chemically washed, or switching to secure electronic payment methods.

"We at the Fed know that checks are not going anywhere, even if there are a couple billion fewer of them around these days," said Mike Timoney, vice president of secure payments based at the Federal Reserve Bank of Boston, in the release. "But as with any payment method, checks have very real vulnerabilities that plenty of people are trying right now to exploit. Understanding what they are can go a long way toward stopping fraudsters from stealing from you."