Cheque tampering is unique among the fraudulent disbursement schemes because it is the one group in which the perpetrator physically prepares the fraudulent cheque. In most fraudulent disbursement schemes, the culprit generates a payment to himself by submitting some false document to the victim organisation such as an invoice or a timecard. The false document represents a claim for payment and causes the victim organisation to issue a cheque that the perpetrator can convert.

Cheque tampering schemes are fundamentally different. In these schemes, the perpetrator takes physical control of a cheque and makes it payable to himself through one of several methods. Cheque tampering frauds depend upon factors such as access to the company chequebook, access to bank statements, and the ability to forge signatures or alter other information on the face of the cheque. Most cheque tampering crimes fall into one of four categories: forged maker schemes, forged endorsement schemes, altered payee schemes, and authorised maker schemes.

Because many business payments are currently still made by cheque, the bulk of this section will focus on how traditional cheque-based payments can be manipulated by dishonest employees. However, businesses are increasingly using electronic forms of payment—such as wire transfers, ACH debits, and online bill-pay services—to pay vendors and other third parties. Consequently, the specific implications and considerations of these types of payments will be discussed in a separate section at the end of this chapter.

Forged Maker Schemes

Forgery can include not only the signing of another person’s name to a document (such as a cheque) with a fraudulent intent, but also the fraudulent alteration of a genuine instrument. This definition is so broad that it would encompass all cheque tampering schemes. For the purposes of this text, the definition of forgery has been narrowed to fit the fraud examiner’s needs. To properly distinguish the various methods used by individuals to tamper with cheques, the concept of “forgeries” will be limited to those cases in which an individual signs another person’s name on a cheque.

The person who signs a cheque is known as the “maker” of the cheque. A forged maker scheme can thus be defined as a cheque tampering scheme in which an employee misappropriates a cheque and fraudulently affixes the signature of an authorised maker thereon. (See the “Forged Maker Schemes” flowchart that follows.) Frauds that involve other types of cheque tampering, such as the alteration of the payee or the changing of the dollar amount, are classified separately.

To forge a cheque, an employee must have access to a blank cheque, be able to produce a convincing forgery of an authorised signature, and be able to conceal his crime. Concealment is a universal problem in cheque tampering schemes; the methods used are basically the same whether one is dealing with a forged maker scheme, an intercepted cheque scheme, or an authorised maker scheme. Therefore, concealment issues will be discussed as a group later in this section.

Obtaining the Cheque

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One cannot forge a company cheque unless one first possesses a company cheque. Most forgery schemes are committed by accounts payable clerks, office managers, bookkeepers, or other employees whose duties typically include the preparation of company cheques. These are people who have access to the company chequebook on a regular basis and are therefore in the best position to steal blank cheques.


If perpetrators do not have access to the company chequebook through their work duties, they will have to find other means of misappropriating a cheque. The method by which a person steals a cheque depends largely on how the chequebook is handled within a particular company. In some circumstances, the chequebook is poorly guarded and left in unattended areas where anyone can get to it. In other companies, the cheque stock might be kept in a restricted area, but the perpetrator might have obtained a key or combination to this area, or might know where an employee with access to the cheques keeps his own copy of the key or combination. An accomplice might provide blank cheques for the fraudster in return for a portion of the stolen funds. Perhaps a secretary sees a blank cheque left on a manager’s desk or a custodian comes across the cheque stock in an unlocked desk drawer.

In some companies, cheques are computer-generated. When this is the case, an employee who knows the password for preparing and issuing cheques can usually obtain as many unsigned cheques as he desires. There are an unlimited number of ways to steal a cheque, each dependent on the way in which a particular company guards its blank cheques. In some instances, employees go as far as to produce counterfeit cheques.


An  employee  had  an  accomplice  who  worked  for  a  cheque-printing  company.  The accomplice was able to print blank cheques with the account number of the perpetrator’s company. The perpetrator then wrote over $100,000 worth of forgeries on these counterfeit cheques.

To Whom Is the Cheque Made Payable?


Once a blank cheque has been obtained, the perpetrator must decide to whom it should be made payable. In most instances forged cheques are made payable to the perpetrator himself so that they can be easily converted. Cancelled cheques that are payable to an employee should be closely scrutinised for the possibility of fraud.

Chart: Forged Maker Schemes

cheque tampering                                                                               cheque tampering

If the perpetrator owns his own business or has established a shell company, he will usually write fraudulent cheques to these entities rather than himself. These cheques are not as obviously fraudulent on their faces as cheques made payable to an employee. At the same time, these cheques are easy to convert because the perpetrator owns the entity to which the cheques are payable.

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If a fraudster is working with an accomplice, he can make the forged cheque payable to that person. The accomplice then cashes the cheque and splits the money with the employee- fraudster. Because the cheque is payable to the accomplice in his true identity, it is easily converted. An additional benefit to using an accomplice is that a cancelled cheque payable to a third-party accomplice is not as likely to raise suspicion as a cancelled cheque to an employee. The obvious drawback to using an accomplice in a scheme is that the employee- fraudster usually has to share the proceeds.


The perpetrator might also write cheques payable to “cash” to avoid listing himself as the payee. Cheques made payable to cash, however, must still be endorsed. The perpetrator will have to sign his own name or forge the name of another to convert the cheque. Cheques payable to “cash” are usually viewed more sceptically than cheques payable to persons or businesses. Some institutions might refuse to cash cheques made payable to “cash.”


Not all fraudsters forge company cheques to obtain cash. Some employees use forged maker schemes to purchase goods or services for their own benefit. These fraudulent cheques are made payable to third-party vendors who are uninvolved in the fraud. For instance, an employee might forge a company cheque to buy a computer for his home. The computer vendor is not involved in the fraud at all. Furthermore, if the victim organisation regularly does business with this vendor, the person who reconciles the company’s accounts might assume that the cheque was used for a legitimate business expense.

Forging the Signature

After the employee has obtained and prepared a blank cheque, he must forge an authorised signature to convert the cheque. The most obvious method, and the one that comes to mind when one thinks of the word forgery, is to simply take pen in hand and sign the name of an authorised maker.


The difficulty a fraudster encounters when physically signing the authorised maker’s name is in creating a reasonable approximation of the true signature. If the forgery appears authentic, the perpetrator will probably have no problem cashing the cheque. In truth, the forged signature might not have to be particularly accurate. Many fraudsters cash forged cheques at liquor stores, grocery stores, or other institutions that are known to be less than diligent in verifying signatures and identification. Nevertheless, a poorly forged signature is a clear red flag of fraud. The maker’s signature on cancelled cheques should be reviewed for forgeries during the reconciliation process.


To guarantee an accurate forgery, some employees make photocopies of legitimate signatures. The signature of an authorised signer is copied from some document (such as a business letter) onto a transparency and then the transparency is laid over a blank cheque so that the signature copies onto the maker line of the cheque. The result is a cheque with a perfect signature of an authorised maker.

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Companies that issue a large number of cheques sometimes use automatic cheque-signing mechanisms in lieu of signing each cheque by hand. Automated signatures are produced with manual instruments, such as signature stamps, or they are printed by computer. Obviously, a fraudster who gains access to an automatic cheque-signing mechanism will have no trouble forging the signatures of authorised makers. Even the most rudimentary control procedures should severely limit access to these mechanisms.


A fiscal officer maintained a set of manual cheques that were unknown to other persons in the company. The company used an automated cheque signer and the custodian of the signer let the officer have uncontrolled access to it. Using the manual cheques and the company’s cheque signer, the fiscal officer was able to write over $90,000 worth of fraudulent cheques to himself over a period of approximately four years.

The same principle applies to computerised signatures. Access to the password or programme that prints signed cheques should be restricted, specifically excluding those who prepare cheques and those who reconcile the bank statement.

Converting the Cheque

To convert the forged cheque, the perpetrator must endorse it. The endorsement is typically made in the name of the payee on the cheque. Since identification is typically required when one seeks to convert a cheque, the perpetrator usually needs fake identification if he forges cheques to real or fictitious third persons. As discussed earlier, cheques payable to “cash” require the endorsement of the person converting them. Without a fake ID the perpetrator will likely have to endorse these cheques in his own name. An employee’s endorsement on a cancelled cheque is obviously a red flag.

Forged Endorsement Schemes

Forged endorsements are those cheque tampering schemes in which an employee intercepts a company cheque intended to pay a third party and converts the cheque by endorsing it in the third party’s name. In some cases the employee also signs his own name as a second endorser. (See the “Forged Endorsement Schemes” flowchart that follows.)

A fraudster’s main dilemma in a forged endorsement scheme (and in all intercepted cheque schemes, for that matter) is gaining access to a cheque after it has been signed. The fraudster must either steal the cheque between the point where it is signed and the point where it is delivered, or he must re-route the cheque, causing it to be delivered to a location where he can retrieve it. The manner used to steal a cheque depends largely upon the way the company handles outgoing disbursements. Anyone who is allowed to handle signed cheques might be in a good position to intercept them.

Cheque Tampering Frauds – Part 1

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