Check fraud: How it happens, how you can avoid it

A lawsuit by a Nassau County couple whose retirement account was pillaged by con artists has shone a harsh light on the vulnerability of our financial nest eggs.

Nicholas J. Ventresca and Michele R. Ventresca, both 70, filed the lawsuit against Bethpage Federal Credit Union after $127,000 was stolen from their money market retirement savings account.

Four bogus checks, written on the Ventrescas' account, were cashed at outside banks between March and April 2022.

In a statement, the credit union said it was not responsible for the loss because the couple had failed to notify officials within the 60-day reporting window specified in the membership agreement.

"When fraud does occur, the affected member's timely identification of the fraud is critical to our efforts to recover lost funds,” a Bethpage official said.

Regardless of the lawsuit's disposition, experts say account holders are vulnerable and need to remain vigilant to safeguard their financial lives. Their advice follows: 

How do scam artists get information that lets them create fake checks or put together identifying information to enter accounts?

A. Connor Cady, channel manager at Atlanta-based Red Sentry, a company that is hired as a penetration tester to reveal physical or online vulnerabilities, said a wealth of identifying information in the dark web gives grifters a head start. "Data breaches happen all the time," he said. They can harvest user names, email addresses, phone numbers and even Social Security numbers. Enterprising hackers can "find those little bits and put them together."

How can account holders find out what pieces of their online identity have been compromised?

A. Experts recommend using https://haveibeenpwned.com/ to see whether your email address has been associated with a data breach. ("Pwned" is gamer slang for "owned.")  Still, Steve Lenderman, a fraud expert at BM Technologies Inc., a banking-as-a-service provider in Maple Shade, New Jersey, said it's a safe assumption that at least some of your information already is compromised. "Your identifying information is absolutely out there," he said. "You have to assume that you're constantly under attack."

Do grifters use electronic banking to evade detection?

A. "There are numerous ways to take customer convenience that the bad guys have flipped," Lenderman said. For instance, they can use or create phony digitized checks that can be deposited without the risk of appearing in person at the bank.

What are the best ways to lock down your key banking information?

A. If possible, avoid using physical checks, which typically include a treasure trove of information (name, address, routing number, account number). Read your financial statements to make sure nothing is amiss and set up alerts on your mobile phone for any substantial transactions. If available, use multi-factor authentication such as Google Authenticator on sensitive accounts.

What other measures can we take?

A. Make sure your computer is not infected with malware, do not click blindly on links in emails or text messages and never give personal information to someone whose identity you can't verify.

Who is responsible for the uptick in check fraud?

A. Lenderman said that street gangs are moving into check fraud, which is easier, less risky and more profitable than selling drugs.

How do these scamsters set up a bank account that lets them cash the checks that they've stolen?

A. Some con artists will recruit a homeless person who is complicit in the fraud to open an account at a bank, Lenderman said. Alternatively, the fraudsters could steal someone's identification and use that to open an account or create a "synthetic identity," a "digital ghost" that can disappear once the scam is complete.

Does the Federal Deposit Insurance Corporation or the National Credit Union Administration protect depositors against fraud?

A. The FDIC and NCUA protect depositors against bank or credit union failure but not against criminal activity.

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.