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 or the amount of the check is changed.
Altered Check Explained
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. Ordinarily, a customer needs to examine his or her 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 he or she does not report the loss within one year.
Guarding Against Altered Checks
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 handwriting of letters or numbers are consistent throughout and that there no visible signs of erasure or alteration.