Office of the Comptroller of the Currency

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Check Fraud: A Guide to Avoiding Losses

Closed Account Fraud

Closed account frauds are based on checks being written against closed accounts. This type of fraud generally relies upon the float time involved in interbank transactions.

Example 1: A fraud ring provides "role players" with business checks drawn on closed accounts at a bank. The "role players" then deposit the checks into a new account at a different bank through one or more ATMs operated by other banks. The float time between the ATM deposits and the checks drawn on the closed accounts reaching the issuing bank for payment allows the criminals to withdraw funds from the new account.

Closed account frauds can be successful when customers do not destroy checks from unused accounts or do not properly inform their banks about account status.

To protect against such frauds, customers should:

• keep their banks informed about the status of accounts,
• actively close unneeded accounts rather than simply not using them,
• destroy checks for unused or closed accounts.

Banks should:

• place special holds on checks drawn on accounts that have been inactive for some time,
• advise customers to destroy checks from closed accounts and notify the bank when they intend to close an account.